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Netflix Q3 result: Continues to grow strong in APAC, much work to do in India

The company has added 2.2 million net subscribers in the quarter

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KOLKATA: Netflix fell short of global subscriber additions in Q3, albeit a slower growth was forecasted by the streaming giant. The company has added 2.2 million net subscribers in the quarter, even lower than its prediction of 2.5 million.

In the first two quarters of 2020, Netflix added 15.8 million net in Q1, 10.1 million net subscribers in Q2. However, the streaming service already warned at the end of Q2 that there would be a decline in subscriber addition due to “pull forward” in the first half.

“As we expected, growth has slowed with 2.2m paid net adds in Q3 vs. 6.8m in Q3 19. We think this is primarily due to our record first-half results and the pull-forward effect we described in our April and July letters. In the first nine months of 2020, we added 28.1m paid memberships, which exceeds the 27.8m that we added for all of 2019. In these challenging times, we’re dedicated to serving our members,” it stated in a letter to shareholders.

Netflix posted revenue of $6.44 billion and earnings of $1.74 per share in the quarter while Wall Street analysts on average expected third-quarter sales of $6.38 billion and EPS of $2.13. For q4, it forecasts 6.0 million paid net adds which is much lower compared to 8.8 million in the corresponding quarter last year. If it achieves the forecast, it will create a record 34 million paid net adds for 2020, well above the prior annual high of 28.6m in 2018.

“As the world hopefully recovers in 2021, we would expect that our growth will revert back to levels similar to pre-Covid. In turn, we expect paid net adds are likely to be down year over year in the first half of 2021 as compared to the big spike in paid net adds we experienced in the first half of 2020. 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,” Netflix said.

However, despite the pandemic effect on shooting, Netflix continues to expect the number of originals launched on the service to be up year over year in each quarter of 2021. It will continue to invest heavily in local language content.

APAC, the largest contributor to q3 growth:

While the quarter has seen a very tepid growth globally, the APAC story is somewhat different. This region was the largest contributor to paid membership growth this quarter with 46 per cent of overall subscriber addition. The revenue also rose 66 per cent year over year.

“We’re pleased with the progress we’re making in this region and, in particular, that we’ve achieved double-digit penetration of broadband homes in both south Korea and Japan. While this is encouraging, we still have much work to do and we're working hard to replicate this success in India and other countries,” Netflix stated.

Netflix is working with local partners like Reliance Jio in India, wherein it launched a bundle with the latter’s mobile and fibre broadband plans in Q3. As part of this broad partnership, it will integrate Netflix with two of Jio’s set top boxes. Netflix also mentioned that it partnered with financial institutions in India to make payment processing easier and more seamless, which it expects will have retention benefits. “All of these initiatives are important and work in concert with our big investment in local originals to improve the Netflix experience for our members,” it added.

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