Netflix has hot quarter, but expects viewership decline after lockdowns

Overall revenue climbed 28% to US$5.7 billion, with Tiger King, Love is Blind and Ozark propelling viewership during the pandemic.

With much of the world in lockdown and live sporting events cancelled for the foreseeable future, many had predicted Netflix would see an uptick in subscribers numbers. But the streaming service blew past even the most optimistic analyst estimates, adding a record 15.8 million subs globally in Q1 – almost double the 8 million forecast by Wall Street.

With the additions, Netflix now has 183 million subscribers across the world, with just under 70 million of those in the U.S. and Canada. While Netflix does not individually report the number of Canadian subs, a financial filing with the U.S. Securities and Exchange Commission (SEC) revealed that Netflix had around 6.5 million paid subscribers in Canada as of Sept. 30.

Overall revenue for Q1 jumped 28% year-over-year to US$5.7 billion, with profit doubling to US$709 million compared to the prior year.

In a letter to shareholders, the company said it expects viewership to decrease and subscriber growth to decelerate when stay-at-home protocols are lifted. It forecasted net subscriber additions of around 7.5 million in Q2.

Over the past six weeks, a number of Netflix originals like Tiger King: Murder, Mayhem and MadnessLove is Blind and the third season of Ozark have become part of the cultural conversation as house-bound populations look for new content to stream. On Tuesday, Netflix confirmed that viewership on those properties has been significant, even by its own standards, with 64 million households watching Tiger King, 30 million watching unscripted dating show Love is Blind and a projected 29 million households viewing Ozark season three. Meanwhile, original film Spenser Confidential has been seen by 85 million households. (Netflix counts a “view” when an episode or movie is watched for more than 120 seconds.)

While production has been halted in almost all the world’s major hubs in response to the COVID-19 pandemic, Netflix noted that its production operations are continuing in a couple of countries, such as South Korea and Iceland, where shelter-in-place restrictions have been eased and governments have deemed it safe for work to resume.

The company also said there will only be a “modest impact” to its Q2 releasing schedule, which will largely be unaffected except for certain series requiring language dubbing.

Looking ahead, the streamer said it remains unclear what the production landscape will look like globally. “No one knows how long it will be until we can safely restart physical production in various countries, and, once we can, what international travel will be possible, and how negotiations for various resources (e.g., talent, stages, and post-production) will play out. The impact on us is less cash spending this year as some content projects are pushed out,” said the letter to shareholders, which added that Netflix is “complementing this effort with additional licensed films and series.”

The surge in Netflix usage since lockdown measures were implemented has put enormous strain on the bandwidth demands in Canada. In response, Netflix announced in late March that it would lower the highest video quality for each bandwidth stream (Ultra-HR, HD, SD) to reduce traffic on telecommunications by 25%. The same situation occurred in Europe, where Netflix was asked to dial down its broadband use to standard definition to conserve bandwidth. In a letter to shareholders, Netflix said it is currently working with ISPs to help increase capacity so that it can lift these limitations as conditions improve.

Netflix isn’t the only streaming service to have benefitted from the implementation of stay-at-home protocols across the world. According to Disney, its OTT product Disney+ reached 50 million paid subscribers earlier this month, putting the service well ahead of the company’s own forecasts. In Canada, Bell Media streamer Crave has also seen record viewership. The week of April 6 to 12 was the most-viewed in the five-year history of the service, according to Bell Media, surpassing the record set the prior week. As well, Jeffrey Katzenberg and Meg Whitman’s Quibi service was downloaded 1.7 million times during its first week.

According to Parrot Analytics, Netflix has experienced steady growth in digital original demand share in both the U.S. and globally since December 2019. In the U.S., its share of digital original demand grew from 50.0% for the month of December 2019 to 53.9% for the month of March 2020. As well, early signs for April show further growth, with the streaming service accounting for 54.7% of U.S. demand share as of April 13. Globally, Netflix has grown its global share of demand for digital original content from 52.3% in December 2019 to 57.8% in March of 2020.

This story originally appears in Playback.