Netflix Falls Short on New Subscribers As Pandemic Boost Fizzles

As streaming competition increased, pandemic constraints eased and live sports returned to television Netflix Inc reported its lowest subscriber growth in four years on Tuesday.

During the quarter that ended Sept. 30, the company added 2.2 million paying subscribers globally, missing Wall Street's aim of 3.4 million and its own outlook, Reuters reports.

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

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

“Domestic subscribers were nearly flat, which highlights Netflix’s saturation in the U.S.,” said Ross Benes, analyst with eMarketer. With domestic additions slowing, revenue growth will likely come from price increases, he said.

At the start of the worldwide coronavirus pandemic, the company announced a blockbuster fifth, 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 viewers across the globe, short of the 6.51 million anticipated by analysts.

The streaming video pioneer is trying to win new customers and fend off competition as viewers embrace online entertainment. During the third quarter, Netflix released “Emily in Paris”, “Enola Holmes” and “The Devil All the Time.”

Netflix acknowledged that competition was increasing as studios across Hollywood from Walt Disney Co to AT&T Inc's WarnerMedia have restructured to compete more directly for video subscribers.

“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 AT&T's HBO Max and Comcast Corp's Peacock, have introduced new options to viewers.

Netflix said its findings mirrored 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 adds 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 the company had pulled in more subscribers in the first nine months of 2020 than in all of 2019. It ended the third quarter with 195.2 million global streaming customers.

“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 published in each quarter of 2021 compared to 2020.

In the third quarter, sales 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.