The ongoing Covid-19 pandemic and resulting economic fallout has turned the media and entertainment industry upside down. For Netflix’s short-term, though, it’s resulted in a huge spike in subscribers to the service.
The streaming service added more than 15.7 million subscribers globally in its most recent quarter, increasing its total global membership base to 182.9 million, the company said today in its quarterly earnings report. That figure represents nearly double the growth the streaming service enjoyed abroad last quarter, when it netted 8.3 million global subscribers.
In the U.S. and Canada, where growth had been slowing for several quarters, Netflix added 2.3 million subscribers this quarter, for a total of 70 million subscribers.
The spike in subscribers is a likely short-term bump due to the coronavirus crisis, Netflix said, and is likely to level out upon a return to some sense of normalcy.
“Like other home entertainment services, we’re seeing temporarily higher viewing and increased membership growth,” Netflix said in a letter to shareholders this afternoon. “In our case, this is offset by a sharply stronger U.S. dollar, depressing our international revenue, resulting in revenue-as-forecast. We expect viewing to decline and membership growth to decelerate as home confinement ends, which we hope is soon.”
Despite the good news, global economic shifts and the appreciation of the U.S. dollar created a drag on international revenue growth, meaning that strong membership growth did not translate to higher-than-normal revenue for the streaming service. Netflix is projecting more regular growth figures in the next quarter but said early projections amounted to “guesswork” because of the ongoing uncertainty around when the pandemic’s effects may lessen.
The bump in subscribers is nonetheless a piece of good news for Netflix, which is facing increased competition from well-funded subscription streaming upstarts like Disney+ and HBO Max and and is, like most other entertainment companies, facing long-term challenges of production pauses.
As is usual in its shareholders letter, Netflix pulled out some of its programming highlights, which due to the lockdown and on recently adjusted viewership metrics, included impressive viewership figures. The true crime docuseries smash hit Tiger King—the lockdown’s first breakout hit—reached 64 million households in a four-week time frame, Netflix said. Meanwhile, the third season of the crime drama Ozark drew a projected 29 million households in the same time frame. Love Is Blind, a reality series that enjoyed widespread success, attracted 30 million viewers in four weeks, and the original comedy action film Spenser Confidential attracting 85 million households.
As of last quarter, views on Netflix are no longer counted when 70% of an episode or movie is viewed, which was the streamer’s previous metric. A view now represents when a household has watched just two minutes of a program.
For the next quarter, Netflix still plans to release its originally scheduled shows and films—save for a few language dubbing issues that has been delayed due to production hiccups—but is scaling back the spend on production this year as timelines for when production can restart remain uncertain.
On a call with investors this afternoon, Netflix chief content officer Ted Sarandos said that the company had no plans to move its release schedule in 2020 because it already had filmed most of its upcoming programming for the year.
“We work really far out relative to the industry because we launch our shows with all episodes at once,” Sarandos said. “So our 2020 slate of series and films are largely shot and are in post-production remotely in locations all over the world, and we’re pretty deep into our 2021 slate.”
Netflix is also investing more in licensed films and series, including two films whose theatrical releases were canceled over Covid-19-related shutdowns: Paramount and MRC’s comedy The Lovebirds, and Enola Holmes, a mystery film starring Stranger Things’ Millie Bobby Brown that the company picked up the rights to today.
“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 and how negotiations for various resources (e.g., talent, stages and post-production) will play out,” Netflix said to shareholders. “The impact on us is less cash spending this year as some content projects are pushed out. We are working hard to complete the content we know our members want and we’re complementing this effort with additional licensed films and series.”
On the programming side, the company has opted to shift production remotely where it can, including its animation production team, which Netflix said was “back up and running” remotely within two weeks of shelter-in-place orders in Los Angeles. The company has more than 200 projects in the post-production stage operating remotely, and is working to set up remote capabilities for voiceover, music and special effects work. The company previously announced that it had set aside $150 million to various funds designed to help support workers in the film industry struggling with the pause in production.
The company’s product team is working remotely but has temporarily reduced the number of product innovations to minimize disruptions to the quality of service. Netflix has also brought 2,000 employees to handle customer service requests remotely in response to increased demand from customers, the company said.
On a call with investors, Netflix chief product officer Greg Peters said tha churn levels for Netflix had, prior to the pandemic, returned to levels similar to before Netflix increased its price a year ago. With that said, the company was not considering changing the price of the service in the immediate future.
“At this point we’re not even thinking about price increases,” Peters said. “What’s going around the world is dominating our thoughts and our considerations, and we want to stay super focused on making sure that we’re continuing to be there and have a great service, making sure we’re able to provide entertainment and escape for our members around the world.”