Netflix's Slow Subscriber Growth and Weak Q1 Amid Intensifying OTT Competition

[Asia Economy Reporter Eunmo Koo] Global online video service (OTT) Netflix posted results that fell short of market expectations as the growth in paid subscribers slowed in the first quarter of this year. However, with highly anticipated releases scheduled for the second half of the year, mid- to long-term growth is expected to continue.

On the 20th (local time), Netflix announced that its revenue for the first quarter of this year reached $7.16 billion, a 24.2% increase compared to the same period last year. Operating profit for the same period rose 105% to $1.96 billion, and the operating margin hit a record high of 27.4% due to reduced costs from delayed content production. Earnings per share (EPS) increased 138.9% to $3.75, reflecting a $250 million gain from the revaluation of euro-denominated debt.

Net subscriber additions were 3.98 million, down 74.8% year-over-year, underperforming the consensus estimate of 6.29 million. The guidance for the second quarter projects revenue of $7.3 billion, an 18.8% increase from the same period last year, and operating profit of $1.87 billion, up 37.3%.

This year’s demand was front-loaded last year due to the pandemic, leading to a slowdown in revenue growth. Hyunji Lee, a researcher at Eugene Investment & Securities, explained, “The first quarter underperformed because prolonged COVID-19 delayed filming, resulting in fewer new original works. However, due to high levels of content investment continuing from the end of last year, content expenditure decreased in the first quarter, leading to the highest operating margin ever recorded.”

In the second half of the year, net subscriber growth is expected to accelerate thanks to new content releases. New seasons of popular franchise titles such as Money Heist, The Witcher, Kissing Booth, and Kingdom are scheduled to be released in the second half, so steeper growth is anticipated compared to the first half.

Researcher Yongmin Cho of Shinhan Investment Corp. said, “Many sequels to popular programs are planned, and the star-studded cast led by Leonardo DiCaprio will appear in Don’t Look Up. In addition to gaining more subscribers through restrictions on shared accounts, the ongoing trend of cord-cutting will bring related benefits.”

Meanwhile, competition with new OTT platforms is intensifying. HBO Max reached 41 million subscribers as of January, achieving its launch target two years ahead of schedule. Disney+ surpassed 100 million subscribers in early March, exceeding its initial 2024 target of 60 to 90 million and is on track toward its revised 2024 goal of 230 to 260 million subscribers. Researcher Hwaejae Kim of Daishin Securities explained, “Although subscriber growth will slow due to the fading effects of COVID-19 and the emergence of competing OTTs, profitability improvement through the supply of high-quality content will continue.”

This content was produced with the assistance of AI translation services.