Netflix on Tuesday reported soaring profits as paid subscriptions surged by more than 15 million at the streaming television service during lockdowns to slow the spread of the pandemic.
Netflix made a profit of $709 million on revenue of $5.8 billion in the first three months of this year, while the number of subscribers grew by 15.7 million to total nearly 183 million, according to earnings figures.
“We’re acutely aware that we are fortunate to have a service that is even more meaningful to people confined at home, and which we can operate remotely with minimal disruption in the short to medium term,” executives said in a letter to investors.
“Like other home entertainment services, we’re seeing temporarily higher viewing and increased membership growth.”
Netflix expects viewing and membership growth to decline as coronavirus concerns abate and people can move about more freely.
The streaming giant expects a net increase of 7.5 million paid subscriptions in the current quarter.
“Given the uncertainty on home confinement timing, this is mostly guesswork,” Netflix said,
“Hopefully, progress against the virus will allow governments to lift the home confinement soon.”
– Turbulent times –
The California-based company said that the long-term effects of huge job losses due to the coronavirus crisis on Netflix revenue remained unclear.
“In our 20+ year history, we have never seen a future more uncertain or unsettling,” executives said.
Netflix shares danced around the closing price in after-market trades that followed the release of the earnings report.
The coronavirus crisis had three main effects on Netflix’s financial performance, the first being temporary acceleration in membership growth, according to the company.
Strengthening of the US dollar, however, has offset revenue gains.
Meanwhile, the shutdown of show production has postponed expenses and freed up cash at the company in the short-term.
“We’ve paused most of our productions across the world in response to government lockdowns and guidance from local public health officials,” Netflix said.
“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.”
– Sidelined shows –
Streaming television service competitors are in the same situation, but Netflix has a library with thousands of titles and an array of show launches ready for release, executives noted.
“Our member satisfaction may be less impacted than our peers’ by a shortage of new content, but it will take time to tell,” Netflix said.
The Walt Disney Company recently said its television streaming service has already won 50 million paid subscribers just five months after its launch in the US.
Disney+ rolled out in India and eight western European countries in recent weeks.
Strict confinement rules are keeping millions of people at home in a bid to curtail the outbreak, effectively providing an enormous captive audience to entertainment giants competing in the streaming market.
Netflix last month created a $100 million fund to help electricians, make-up artists, drivers and other production workers whose jobs have been stopped by the pandemic.
The company also said it is donating an additional $30 million to third parties and non-profits providing emergency relief to out-of-work crew and cast across the broader TV and film industry in countries where it has a large production base.