Netflix Misses Subs Forecast for Q3

Subscriber growth slowed at Netflix in Q3, with the streaming giant adding 2.2 million net paid customers in the period.

The platform had forecast 2.5 million net additions for this period. It beat its forecasts for Q1 and Q2, with the pandemic helping to fuel 15.8 million net new additions in the first quarter and 10.1 million in the second quarter. In the first nine months of 2020, Netflix added 28.1 million paid memberships, topping the 27.8 million it added in all of 2019.

Q3 revenues at Netflix hit $6.4 billion, a 22.7 percent year-on-year increase. Net income for the period was $790 million. It ended the quarter with 195.15 million paid memberships, a 23.3 percent year-on-year increase.

In Q4, Netflix forecasts 6 million paid net additions. “The state of the pandemic and its impact continues to make projections very uncertain, but as the world hopefully recovers in 2021, we would expect that our growth will revert back to levels similar to pre-COVID,” the company said in its letter to shareholders. “In turn, we expect paid net adds are likely to be down year over year in the first half of 2021 as compared to the big spike in paid net adds we experienced in the first half of 2020. We continue to view quarter-to-quarter fluctuations in paid net adds as not that meaningful in the context of the long-run adoption of internet entertainment, which we believe is still early and should provide us with many years of strong future growth as we continue to improve our service.”

On the content front, production has resumed on key titles such as Stranger Things and The Witcher. “Since the almost-global shutdown of production back in mid-March, we have already completed principal photography on 50-plus productions and, while the course and impact of COVID-19 remain unpredictable, we’re optimistic we will complete shooting on over 150 other productions by year-end.”

Key successes in the period included new seasons of The Umbrella Academy and Lucifer, Ryan Murphy’s Ratched and the non-scripted American Murder: The Family Next Door. In terms of international originals, Netflix says it will continue to invest in local-language content, highlighting the recent success of Oscuro Deseo (Dark Desire) from Mexico as well as Korean dramas.

AsiaPac was a driver for Netflix in Q3, delivering 46 percent of paid net additions, with revenues up 66 percent. AsiaPac delivered revenues of $635 million from a paid membership base of 23.5 million. U.S. and Canadian revenues were $2.9 billion with a subs base of 73.08 million. EMEA revenues were $2 billion, with paid memberships of 62 million. Latin America delivered revenues of $789 million from 36.3 million paid subs.