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Netflix subscription growth has slowed in 2021

Pace of new signups drops as the pandemic eases

(Mike Blake/Reuters)

As shutdowns end, Netflix’s astronomical growth appears to be slowing too.

The company, which saw a gain of nearly 16 million global subscribers in the first quarter of last year as the coronavirus began to spread, registered an increase of 4 million in the January-March period of 2021, the company said Tuesday. The number was below the 6 million subscribers that analysts had forecast, based in part on Netflix’s own guidance for the quarter back in January.

Investors were disheartened by the news, sending the share price down 11 percent in early after-hours trading to $490, its lowest price since November.

Still, earnings per share for the quarter were strong, coming in at $3.75, a number far higher than the $2.97 analysts expected.

The company attributed the subscriber slowdown to fewer shows being produced because of shutdowns. “The production delays from covid-19 in 2020 will lead to a 2021 slate that is more heavily second half weighted with a large number of returning franchises,” it said in an investor letter.

As with many Hollywood entities, Netflix endured a raft of production suspensions due to the pandemic, including on the new season of “Stranger Things,” which was several weeks into production last March when it was forced to halt until September. The second season of its fantasy series “The Witcher” was shut down from March to August in the United Kingdom.

In addition to consumer interest in out-of-home entertainment growing as shutdowns are lifted, Wall Street harbors fears that other companies are making up ground on Netflix. Disney Plus hit 100 million global subscribers last month. HBO Max has 41 million subscribers, though about 18 million of those are “activated users” who already subscribed to HBO.

Even with the slower growth, Netflix now has about 208 million global subscribers, way ahead of both companies.

Overall, Netflix gained about 36 million subscribers globally during 2020, as many people were stuck at home looking to be entertained.

In a call with analysts later in the evening, co-chief executive Reed Hastings acknowledged the competition had intensified — and even that there were some slowdowns to go along with it — but said he didn’t believe that would pose a long-term threat.

“Ten years, we’re growing smooth as silk, and then it’s just a little wobbly right now,” he said. “And of course we’re wondering ‘well, wait a second, are we sure it’s not competition?’”

But then, he said, “we looked through the data, look at different regions where new competition has launched and we just can’t see any difference in our relative growth.”

Netflix has been both lauded and derided for relying on a single large revenue stream — subscription dollars for shows and movies.

On the call, company executives briefly hinted that videogames could be a part of future expansion. (It currently plays in that mainly via licensing out a few properties, like “Stranger Things,” to outside developers.)

“We’re trying to figure out all of the different ways that we can increase those points of connection and deepen that fandom and certainly games is a really interesting component of that,” chief product officer Greg Peters said.

But then Hastings cooled potential speculation of any new business.

“I wouldn’t look for any large secondary pool of profits,” he said.