Netflix Packs on Record 16 Million Subscribers in Q1, Getting Huge Lift From Coronavirus Lockdowns

Netflix added a net 15.77 million paid streaming customers in the first quarter of 2020 — blowing away prior estimates thanks to the coronavirus pandemic and setting a record for quarterly gains.

The streamer said it had 182.9 million paid subscribers globally as of the end of Q1, up 22.8% from a year earlier. Netflix had previously told investors it expected to add 7.0 million subs in the quarter, but that was before COVID-19 kept millions of people homebound.

“[O]ur membership growth has temporarily accelerated due to home confinement,” Netflix said in its quarterly shareholder letter. In addition, it said that due to the shutdown of Hollywood productions “some cash spending on content will be delayed, improving our free cash flow, and some title releases will be delayed, typically by a quarter.”

As another negative consequence of the pandemic, Netflix said the “sharply stronger U.S. dollar” depressed international revenue. The company also said customer-support operations suffered significant disruption before it added 2,000 new remote agents.

In after-hours trading Tuesday, Netflix shares popped to new all-time highs — up as much as 4.8% to $454.80 per share — but fell back to up about 1%.

Wall Street estimates for how big Netflix’s Q1 “quarantine bump” might be were mixed. Some analysts expected the company to report in-line with the prior 7 million guidance, while others forecast global net gains of 8.5 million or as much as 10 million.

Netflix revenue for Q1 came in at $5.77 billion, in line with analyst consensus estimates, while net income of $709 million ($1.57 per share) was slightly lower than Wall Street’s expected EPS of $1.65.

For the second quarter, Netflix projected 7.5 million net additions worldwide. “Hopefully, progress against the virus will allow governments to lift the home confinement soon,” it said in the shareholder letter. “As that happens, we expect viewing and growth to decline.”

One of the most popular shows on Netflix during the quarter was docuseries “Tiger King.” Nielsen said the show lured 34.3 unique TV viewers in the U.S. within the first 10 days of release, topping “Stranger Things” Season 2 over the same timeframe.

Netflix, in announcing Q1 earnings, provided viewership figures for some of its most popular originals as it has selectively done in the recent past. Note, however, the company’s viewing metrics count how many member accounts clicked on a title — and watched for a minimum of 2 minutes.

For whatever they’re worth, the company touted worldwide estimates of how many households “have chosen to watch” a cherry-picked batch of originals: “Tiger King,” 64 million; “Spenser Confidential,” 85 million; and dating show “Love Is Blind,” 30 million. Spanish-language hit “La Casa de Papel” (“Money Heist”), which debuted April 3, had 65 million households sampling it. Netflix said it projected “Ozark” Season 3 to have been selected to watch by 29 million member households in its first four weeks.

Even with the massive Q1 subscriber surge, Netflix faces stepped-up competition for market share, particularly in the U.S. WarnerMedia plans to launch HBO Max on May 27, and NBCUniversal currently has set the national rollout of Peacock for July 15. Meanwhile, Disney Plus has been going gangbusters, having signed up 50 million paid subscribers worldwide as of early April — just five months after its initial launch.

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