Netflix’s subscriber growth comes to a screeching halt in Q3 2020

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FILE PHOTO: The Netflix logo is seen on their office in Hollywood, Los Angeles, California, U.S. July 16, 2018. REUTERS/Lucy Nicholson

Netflix is one of the few companies that benefitted from the COVID-19 pandemic. As people stayed home amid lockdowns and now continue to limit their activities, they have looked for ways to stay entertained. Of course, the streaming giant’s platform is an easy answer.

Earlier this year, Netflix saw its subscriber numbers skyrocket. Unfortunately, that streak has come to an end in the third quarter. The company reported its third-quarter earnings on Tuesday to the dismay of investors.

It acquired just 2.2 million net subscribers in Q3, a bit under the 2.5 that the company predicted. Although the slowed growth isn’t unexpected, it also isn’t good news. Fortunately, Netflix is resuming production on many of its shows and isn’t afraid of running out of content. That should help right the ship in 2021 and beyond.

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Third Quarter Struggles

Despite its decline in subscriber growth, Netflix brought in $6.44 billion in revenue during the quarter. That was enough to beat previously set expectations.

In a letter to shareholders, Netflix says, “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.”

It goes on to note that subscriber additions will likely be down in the first half of 2021 as fallout from the pandemic remains. A year-over-year decrease in that frame can be attributed to the massive spike seen in the first half of 2020.

Content Considerations

For companies who did well in the early phases of the pandemic, the third quarter has been a reckoning of sorts. That definitely applies to Netflix.

This year has been brutal for the film and TV industry. COVID-19 restrictions shut down or delayed almost every production, forcing studios to postpone releases into 2021 and beyond. Others chose to skip theaters altogether and release feature films on their own streaming platforms.

In recent years, Netflix has steadily ramped up its original offerings. This means that it was hit hard by production delays as well. Although a number of shows and movies have been postponed or canceled, the platform still has plenty of new content on the way.

In the aforementioned shareholder letter, Netflix said, “For our 2021 slate, we continue to expect the number of Netflix originals launched on our service to be up year over year in each quarter of 2021 and we’re confident that we’ll have an exciting range of programming for our members, particularly relative to other entertainment service options.”

That being said, some shows might not be able to survive COVID-19. Ross Benes, an analyst at eMarketer, told The Verge, “The cancellation of ‘Glow’ will not be unique. We’ll see more of that in the coming months. They have a lot of shows that have big budgets and a niche audience. Those shows are all risk. It’s too expensive.”

However, this will be a balancing act for the streaming giant. It needs new content to retain and attract consumers but can’t afford to bleed money into every new project. One solution could be a price hike to its monthly subscription. Users should prepare for the worst as Netflix tries to stay afloat. An extra dollar per month could be on the horizon.

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