Note to self: Beware forecasters who say Netflix’s 15.77 million new subscribers in the quarter is a bad thing. Or say it’s never going to happen again. And, really, don’t listen when they sing their siren song that subscribers will begin to trim subscription spend as the economy worsens.
I’ve heard it all before. And they were wrong.
Netflix is forecasting 7.5 million subs in Q2 but admits it’s basically a guess in a market dependent on whether Covid-19 is contained or not.
Netflix in Q2 is a crapshoot, but the odds are decidedly in its favor. If ever it was going to see back-to-back quarters with 15 million new subscribers, this is the quarter in which it will happen.
Cancel Netflix? Not very likely
Without stretching too much, it’s easy to say consumers are solidly moving from bloated cable contracts and equally boated ad loads on “free” TV to a world of reasonably price subscriptions services.
Netflix is the future. And the future, well, hell, it began years ago when Netflix first began to stream.
There’s a well-known analyst who for years campaigned on the slogan that Netflix would be brought down by (insert reason here).
Studios would shut it out. Nope.
Cable operators would launch their own services and out compete it. (Or, the alternative, big retail – ie. Target and Walmart – would launch “killer services.)
- Netflix Q1 by the numbers:
- Q1 revenue of $5.77 billion beat Wall Street estimates of $5.74 billion and Netflix’s own forecast of $5.73 billion.
- Netflix missed Wall Street’s (GAAP) EPS ($1.64) and its own estimate ($1.66), closing the quarter with EPS of $1.57;
- Q1 global paid subscriber growth was 15.77 million, nearly double Wall Street estimates of 8.47 million and Netflix’s own 7 million forecast.
- It’s forecasting 7.5 million sub growth in Q2;
- Revenue of $6.05 billion, above Wall Street estimates of $5.96 billion
- Q2 earnings per share (GAAP) forecast at $1.81 compared to the street’s estimate of $1.55.
Of course there were the endless forecasts that Netflix would run out cash, couldn’t scale globally, or would tick off subscribers by raising prices.
Well, it has ticked off some subs by raising prices. But those disgruntled subs have been overrun by subscribers who see Netflix as a value that’s hard to miss. Netflix has made other mistakes. Some analysts saw spinning off the DVD-by-mail service as fatal.
Not so much.
Analysts good at guessing wrong on Netflix
So, to the regular – and inevitable – group of analysts who predict subscribers will look to trim their subscription bills and drop Netflix, I say this: Bull.
You’ve been predicting the same thing for five years and it hasn’t happened.
Subscribers – regardless of the economy – are at a point now where they’ll cut cable first. They’re more likely to drop Netflix-like services that don’t deliver as much original content, or have the breadth and depth of Netflix’s catalog before they churn out. (And, frankly, they’ll likely cut the cord with cable before they cut those other services.)
Analysts also have been predicting the rise of AVOD for years. SO far, again, not so much. In fact, AVOD services are facing a tough time because of Covid-19, too. Brands are just too leery at the moment to commit to running ads at a time when consumers have decided that spending on hard goods isn’t a great idea.
The bottom line
There’s no doubt, TV viewing has seen a surge in the past few months. But it’s still, in general, note seeing the ratings it did a year ago… or even two years ago. Consumers just aren’t tuning in.
Streaming services, meanwhile, also have seen a surge. But it’s one that’s carried them into new territory, with time spent and video views doubling and even tripling in some cases.
And all of those news streaming subscribers are unlikely – there’s no chance, really – to return to technology they’ve abandoned.
Stay tuned – and stay well.