Netflix subscriber growth drops to lowest in 4 years as the world steps out

By Rahul Vaimal, Associate Editor
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As streaming competition grew, pandemic constraints eased and live sports returned to television, Netflix has recorded its lowest subscriber growth in four years.

During the quarter that ended on September 30, the company added 2.2 million paying subscribers globally, missing experts’ estimates and its own forecast of 3.4 million.

At $1.74, earnings per share also dropped below analyst estimates. According to IBES data from Refinitiv, the consensus forecast was $2.14.

Pandemic boost

Netflix stock, one of the biggest winners this year as people stayed home in the midst of the pandemic, fell nearly 6% last day to $494 in after-hours trading.

At the start of the worldwide coronavirus pandemic, the company announced a blockbuster quarter, adding 15.8 million paying customers from January through March.

Netflix had warned investors that in the latter half of the year, as COVID-19 restrictions relaxed, a sudden increase in fresh sign-ups would fade. In the fourth quarter, Netflix projected it will pull in 6 million new subscribers across the globe, short of the 6.51 million anticipated by analysts.

Increased competition

As users adopt online entertainment, the streaming video pioneer is seeking to attract new subscribers and fight off competition. Netflix released a variety of news shows and movies during the third quarter.

Netflix agreed that competition was growing as studios from Walt Disney to WarnerMedia in Hollywood restructured to compete for video subscribers more directly. “Competition for consumers’ time and engagement remains vibrant,” Netflix said in a letter to shareholders.

Major sports have resumed play in recent months and nascent streaming platforms, including HBO Max and Peacock, have introduced new options to viewers.

Netflix said its findings reflected the fact that early in the year it saw such a huge increase in customers.

“We continue to view quarter-to-quarter fluctuations in paid net ads 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,” the company said.

Netflix officials noted that in the first nine months of 2020 , the company had brought in more viewers than in all of 2019. It completed the third quarter with 195.2 million global streaming users.

“Next time we get together, we should be over 200 million members, completing a year of 34 million (additions),” an annual record, Co-Chief Executive Reed Hastings said in an analyst interview.

The company also announced that it plans to complete the shooting of over 150 productions by the end of the year and that more original content will be released in each quarter of 2021 compared to 2020.

In the third quarter, revenue rose 22.7 percent to $6.44 billion, edging past expectations of $6.38 billion. Net income grew from $665.2 million, or $1.47 per share, a year ago, to $790 million, or $1.74 per share, in the quarter.