Netflix's momentum from 2020 didn't carryover into 2021 it appears, with the streaming giant on Tuesday reporting it added 2 million less subscribers than it expected between January and March.
Netflix added 4 million accounts globally in Q1, bringing the company to 207.6 million subscriptions overall. That came in below the 6 million new accounts Netflix projected it would add in Q1.
"We believe paid membership growth slowed due to the big Covid-19 pull forward in 2020 and a lighter content slate in the first half of this year, due to Covid-19 production delays," the company said in its letter to shareholders.
In other words, Netflix is saying its underwhelming Q1 performance was due in large part to its success in 2020, when it added a company-record 37 million new accounts. On the brighter side for Netflix shareholders, the company topped Wall Street's earnings per share target of $2.98 by reporting EPS of $3.75. Sales of $7.16 billion matched analyst estimates of $7-$7.1 billion.
Another key takeaway from Netflix's report: the company said it will spend "over $17 billion in cash on content this year."
Netflix shares dropped 10% in early after-hours trading to $490 per share. The company's stock likely wasn't helped out by Netflix's Q2 projections, with the company saying it expects to add 1 million subscribers between April and June. That includes an expectation that growth will be "roughly flattish" in the U.S. and Canada, as well as in Latin America. Netflix said this is due to a few factors, including delayed productions and the "pull forward" effect of 2020, when the company added more subscribers than it anticipated.
The company added in its letter to shareholders it continues to "anticipate a strong second half with the return of new seasons of some of our biggest hits and an exciting film lineup. In the short-term, there is some uncertainty from Covid-19; in the long-term, the rise of streaming to replace linear TV around the world is the clear trend in entertainment."
As TheWrap recently reported, Netflix is still at the top of the streaming food chain, but it's lead may be slipping as new competitors enter the market. New data shared by Ampere Analysis showed that while Netflix holds 20% of the U.S. streaming market, its dominance over the rest of the streaming landscape has shrunk from 29% -- a drop of nearly one third- as more services like HBO Max and NBCU's Peacock have debuted in the last year.
In its shareholder letter, Netflix said it doesn't believe "competitive intensity materially changed in the quarter or was a material factor in the variance as the over-forecast was across all of our regions." The company said the subscriber-miss was due primarily to a harder time acquiring new customers, since "retention in Q1 was in line with our expectations." It's worth pointing out this was the first full quarter in which Netflix's most recent price hikes, which were announced last October, factored into its quarterly performance.