Following the outbreak of the global coronavirus epidemic, the introduction of quarantine measures in many places helped Netflix and the company almost took off with the second quarter of the year. However, in parallel with the relaxation of quarantine measures, a slowdown started in some areas, especially in the number of subscribers for Netflix. In addition, the possibility of the coronavirus preventing new productions is also mindful, “Is Netflix waiting for hard times?” brought the question. While the company is aware of this possibility, it doesn’t seem very concerned.
Announcing its third quarter results, Netflix continued to gain new subscribers, albeit at a slower pace. The company’s net subscriber revenue in the third quarter was 2.2 million. Netflix’s prediction was that this number would be around 2.5 million. It seems that the most important issue for Netflix, which exceeded expectations with $ 6.44 billion in revenue, will be keeping the new content stream alive.
The letter sent to shareholders from Netflix includes the following statements: “The pandemic and its effects make it extremely difficult to predict. However, as the world normalizes by 2021, we expect our growth to return to pre-COVID levels. We expect our net subscriber earnings to be lower in the first half of 2021 compared to the big increase in 2020. ”
Netflix’s biggest advantage over its competitors so far has been that it constantly offers new series and movies. Because at the beginning of the pandemic, the shooting of Netflix’s 2020 productions was completed to a great extent. The final touches of most of the productions could also be done remotely. But now Netflix is about to board the same ship with its rivals. The company’s CEOs Reed Hastings and Ted Sarandos also drew attention to the difficulty of restarting production, especially in the US.
Analysts say that Netflix has so far been prepared for the halt of production, but this situation may change. Speaking to The Verge website, analyst Ross Benes commented, “If Hollywood is shut down for 9 months, it will affect you too.”
Netflix can use subscriber growth for original content investments
If Netflix continues to increase its subscriber base, this can bring additional revenue to the company and increase its content budget. Pivotal Research Group analyst Jeff Wlodarczak said that investments in original content will also help gain new subscribers. In short, it is possible to talk about a continuous cycle here.
Although there are more competitors to Netflix than before, the company has managed to remain unaffected by the advantages it has so far. Although there are problems in the production processes due to the coronavirus, the size of its global scale provides Netflix with a significant advantage.