Millions of people are confined in their homes amid the COVID-19 pandemic, and Netflix has been a source of entertainment for most of them. In the first quarter of the year, Netflix reported 15.8 million new users who signed up for paid membership.
However, the US streaming service has warned investors of a potential slowdown in the future as the coronavirus-driven growth might not be sustainable.
“Some of the lockdown growth will turn out to be pull-forward from the multi-year organic growth trend, resulting in slower growth after the lockdown is lifted country by country,” Netflix advised shareholders in a letter after the earnings released yesterday.
For the first three months of 2020, Netflix recorded US$5.8 billion in total revenue, which is an increase of 29% from what it made during the same time last year. The Asia-pacific region has the highest contribution with US$484 million, a 51.3% increase from last year.
Although this amount contributes only 8% of the total revenue, the region remains one of the highest growth markets of Netflix. The Asia-pacific region saw the second-highest jump in paid subscribers in this past quarter with more than 3.6 million new members, behind Europe.
While this spike was anticipated, Netflix says that it is quite difficult to predict how the pandemic will affect business in the long run, and what they can offer for now is “guesswork.”
Netflix expects to add at least 7.5 million more subscribers in the second quarter of the year, which will end in June, and its guess is it will have a lower net addition than 2019.
“We don’t use the words guess and guesswork lightly,” Reed Hastings, the company’s CEO said on Tuesday. “We use them because it’s a bunch of us feeling the wind, and it’s hard to say.”
Meanwhile, the coronavirus outbreak has affected Netflix’s production pipeline. “We have paused most of our productions across the world in response to government lockdowns and guidance from local public health officials,” the company said on Tuesday.
Netflix is still able to continue with production in Iceland and South Korea, thanks to the countries’ effective efforts in containing COVID-19.
“Those are two countries that were very aggressive about testing and tracking early. So I think it probably lays out a good framework for future rollouts,” Ted Sarandos, the chief of content officer Netflix said. He further added that they are taking some key learnings about how they run the productions in the countries and apply them to other productions around the world.