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Netflix hits jackpot: Q1 2020 sees subscriber count and revenue skyrocket

Netflix has today released its earnings for Q1 2020, showing huge increases in subscriber count as a result of the ‘stay-at-home’ economy brought on by the COVID-19 pandemic.

The global streaming giant said in its report that while it has seen viewership and subscriptions skyrocket this quarter, it expects this to settle down as people eventually come out of lockdown.
 

Here are some of the highlights of Netflix’s report:

Q1 2020 total revenue was US$5.7 billion, an increase of 27.6% from $4.5 billion in the same period in 2019, and an increase of 5.5% from Q4 2019.

Netflix’s current subscriber count stands at 182.8 million, representing a 15.77 million jump from Q4 2019, and a 22.8% increase year-on-year. 

Diluted earnings per share (EPS) was $1.57, increasing from $0.76 year-on-year.

Netflix also included forecasts for Q2 2020 in its report, with the company expecting 7.5 million additional new subscribers in that quarter, as well as a projected 4.9% increase in revenue from Q1 to Q2, increasing to $6.05 billion.

However, the company says given the uncertainty on the timing of home isolation and the fact that different countries are at different stages, the forecasts were ‘mostly guesswork’.

Netflix also says it expects viewing and growth to decline as governments lift lockdown restrictions.

According to its projections, Netflix says the person who didn’t join the service during their isolation period was unlikely to join after isolation requirements are lifted.

While its outlook for Q2 is optimistic, the streaming giant says its projections for Q3 may not be as good as its Q3 2019 counterpart, as in that quarter the service released new seasons for two of its biggest offerings, Stranger Things and Money Heist.

Netflix also acknowledged in its earnings report the almost total shutdown of global production on the service’s original programming in response to government lockdowns.

In its statement, Netflix says: “No one knows how long it will be until we can safely restart physical production in various countries, and, once we can, what international travel will be possible, and how negotiations for various resources (e.g., talent, stages, and post-production) will play out.”

Reaction to Netflix’s report today has been mostly optimistic, despite Netflix’s own caution about the year ahead.

Data and analytics company GlobalData has reported that Netflix’s earnings statement for Q1 2020 means that their market capitalisation, at $190.4 billion at market close April 21, is higher than Disney, Exxon and IBM.

It says the streaming behemoth is weathering the COVID-19 storm ‘extremely well’ compared to competitors like Disney+.

“These strong financials are reflective of GlobalData’s position on Netflix, which has been positive since the outbreak of COVID-19,” says GlobalData thematic analyst Danyaal Rashid.

“[GlobalData] believes that Netflix will do well out of this crisis as more people will be taking up subscriptions and existing customers will be retaining their contracts. 

“Netflix is ranked second in GlobalData’s music, film, and TV thematic rankings, behind only Amazon, and has received a rating of four out of five for the coronavirus theme – the joint highest rating.

“In contrast, Netflix’s rival Disney has suffered as a result of the pandemic. 

“In the music, film and TV thematic rankings, Disney has fallen three places to tenth, having been awarded a score of two out of five for its ability to deal with COVID-19. 

“Disney’s market capitalisation has fallen from an all-time high of $273bn in late November 2019 to just $181.5bn at market close on 21 April 2020,” says Rashid.

“There are two main reasons why Disney has struggled while Netflix has prospered. Firstly, unlike Netflix, Disney is reliant on ad revenues due to its broadcast offerings, and this revenue stream is drying up rapidly. 

“Secondly, COVID-19 has forced Disney to close its theme parks, which generate more than a third of its revenues, delivering a huge hit to the company’s top line.”