The streamer now has nearly 183 million global subscribers.
People watching more entertainment programming while sheltering at home propelled Netflix to a strong first three months of 2020.
The company added 15.8 million subscribers during the first quarter of the year, a period of growth that has rocketed its global base to nearly 183 million.
Netflix had expected to add just 7 million subs during the period, but the company forecast that growth before the full effects of the pandemic had been felt globally.
In spite of the strong period, CEO Reed Hastings hit a somber note in his letter to shareholders. "In our 20+ year history, we have never seen a future more uncertain or unsettling," he wrote. "The coronavirus has reached every corner of the world and, in the absence of a widespread treatment or vaccine, no one knows how or when this terrible crisis will end. What’s clear is the escalating human cost in terms of lost lives and lost jobs, with tens of millions of people now out of work."
He continued by explaining that Netflix is seeing "temporarily higher viewing and increased membership growth" but "we expected viewing to decline and membership growth to decelerate as home confinement ends, which we hope is soon." The company is forecasting that it will at 7.5 million subs during the second quarter, which spans the April to June period where people have largely been sheltering at home, but noted that the figure is "mostly guesswork" given the uncertainty around how long the shutdown will last.
The strength of the U.S. dollar during the global pandemic has also hurt the company's revenue growth during the period despite its higher-than-expected subscriber growth. Internationally, where Netflix added nearly 13.5 million subs driven by strong growth in Europe, Middle East and Africa, was less than forecast due to the dollar's sharp rise.
During the shutdown, breakout Tiger King: Murder, Mayhem and Madness has been popular with viewers. Netflix projects that 64 million members will "choose to watch" the show during its first four weeks of availability. Spanish drama Money Heist has also been a draw, with 65 million member accounts expected to watch the series. (Netflix counts an account that selects a title and watches it for two minutes as a viewer.)
Netflix also provided new details about how the shutdown has impacted its operations, stating that the product team has been unaffected but that product innovation has slowed as the company focuses on releasing features that "we know will add meaningful value for our members, such as improved parental controls."
One area where Netflix has been most impacted is in the production of its upcoming projects. Like all entertainment companies, Netflix has had to put filming of most of its shows and movies on hold. (A few projects remain in production in Korea and Iceland.) The company said that production on its animation projects is continuing through work-from-home setups and that more than 200 projects are in post-production.
Netflix has created a $100 million fund to support workers whose livelihoods have been impacted by the shutdown and has said it will pay those crews for seven weeks.
In the second quarter, Netflix plans to release all of its planned shows and films, though the language dubbing on some projects will be impacted. It will also supplement its lineup with acquisitions of titles that were originally intended for theatrical release, including Paramount's The Lovebirds and Legendary's Enola Holmes. (The Lovebirds was produced by MRC, which shares a parent company with The Hollywood Reporter.)
Netflix also said that its customer support teams were disrupted by the shift to work-from-home but have largely recovered. The company has added 2,000 additional customer support agents to account for increased demand.
Netflix, which has burned through cash to sustain its levels of high growth in recent years, has been moving toward becoming cash flow positive. The pausing of productions means that it is currently investing less cash up front. As a result, it now expects to have negative free cash flow of $1 billion for the year compared with its previously forecast $2.5 billion in negative free cash flow.
Netflix stock closed the day flat at $433.83. The company's shares, which jumped during after-hours trading on Nasdaq, are up nearly 32 percent since the beginning of the year.
More to come.
