Netflix has reported a slowdown in subscriber growth between January and March 2021, resulting in its share price dropping sharply. In a letter to shareholders, the streaming giant disclosed that they had gained approximately 3.98 million new subscribers in this period, falling short of the forecasted 6 million for the quarter.
Netflix have framed the slowdown as inevitable due to the sheer scale of subscriber growth in 2020 amid the coronavirus pandemic, which forced people to stay home. As well as this, the company noted that ‘a lighter content slate in the first half of this year, due to Covid-19 production delays may have also played a part in the reduction of subscriber growth.
News of the slowdown resulted in the streaming platform’s shares dropping by 11% in after-hours trading to $489.28. The drop erased $25 billion from the company’s market capitalisation.
The letter warns that the slowdown will likely continue into the second quarter of the year, estimating an addition of 1 million new subscribers, compared to 10 million in the same period in 2020.
However, it then goes on to say that the company ‘anticipate[s] paid membership growth will re-accelerate in the second half of 2021 as we ramp into a very strong back half slate with the return of big hits like Sex Education, The Witcher, La Casa de Papel (aka Money Heist), and You’.
Despite the growth of rival streaming services such as Disney+ and Amazon Prime Video, the shareholder letter states that Netflix does not ‘believe competitive intensity materially changed in the quarter or was a material factor in the variance’ of subscriber growth.