After unprecedented growth in 2020 where the company was almost certainly the biggest beneficiary of global stay at home orders and lockdowns resulting in soaring membership, subscription video-on-demand leader Netflix has seen business gravity apply over the course of the first quarter of 2021.
For the three-month period ended 31 March 2021, the company had 208 million paid memberships around the world, up 13.6% compared with the end of Q1 20 and 3.98 million more than at the end of the fourth quarter of 2020.
Revenue for the quarter grew 24% on an annual basis to $7.163 billion, and operating profit and margin reached all-time highs to $1.96 billion and 27.4% respectively. The operating income posted was more than double that of the first quarter of 2020.This exceeded Netflix’s guidance forecast primarily due to the timing of content spend. Net income for the quarter was $1.707 billion.
Assessing the underlying trends in its quarterly letter to shareholders, the company said that what it called the “extraordinary” events of Covid-19 led to unprecedented membership growth in 2020, as it pulled forward growth from 2021, and delayed production across every region. This in turn had resulted in ending 2020 with a larger membership and revenue base than it would otherwise have had, contributing to record Q1’21 revenues. Average revenue per membership rose 6% compared with the same point in 2020, 5% excluding a foreign exchange impact of $80 million.
It added that after ramping production levels late in 2020 it had lower content spend in Q1’21. Content amortisation grew 9.5% year-on-year in Q1’21 compared with 17% in the 2020 financial year. The result was a 10 percentage point year over year jump in operating margin to an all-time high level.
Despite the presence of rivals such as Disney+, Hulu, HBO Max, Peacock and latterly discovery+, Netflix did not believe that competitive intensity materially changed in the first quarter of 2021 or was a material factor in the variance of performance in regions. Global growth was relatively steady even though the level of competitive intensity varied by country.
Going forward, Netflix cautioned that while it anticipated a strong second half with the return of new seasons of some of its biggest hits and “an exciting” film line-up, there would be a lighter content slate in the first half of 2021, and hence slower membership growth. Overall it predicted paid net additions of 1 million for the second quarter of the year, compared with 10 million in the quarter a year ago as the effects of the pandemic were being felt.
While UCAN and LATAM regions were expected to be roughly flattish in memberships, Netflix anticipated paid membership growth to re-accelerate in the second half of 2021 as it launched a back half slate with the return of big hits like Sex Education, The Witcher, La Casa de Papel (Money Heist) and You. Netflix said that it projected spending over $17 billion in cash on content over the course of 2021.
Moreover, it noted that while in the short-term, there would still be some uncertainty from Covid-19, in the long-term, the rise of streaming to replace linear TV around the world was the clear trend in entertainment.
Revenue for the quarter grew 24% on an annual basis to $7.163 billion, and operating profit and margin reached all-time highs to $1.96 billion and 27.4% respectively. The operating income posted was more than double that of the first quarter of 2020.This exceeded Netflix’s guidance forecast primarily due to the timing of content spend. Net income for the quarter was $1.707 billion.
Assessing the underlying trends in its quarterly letter to shareholders, the company said that what it called the “extraordinary” events of Covid-19 led to unprecedented membership growth in 2020, as it pulled forward growth from 2021, and delayed production across every region. This in turn had resulted in ending 2020 with a larger membership and revenue base than it would otherwise have had, contributing to record Q1’21 revenues. Average revenue per membership rose 6% compared with the same point in 2020, 5% excluding a foreign exchange impact of $80 million.
It added that after ramping production levels late in 2020 it had lower content spend in Q1’21. Content amortisation grew 9.5% year-on-year in Q1’21 compared with 17% in the 2020 financial year. The result was a 10 percentage point year over year jump in operating margin to an all-time high level.
Despite the presence of rivals such as Disney+, Hulu, HBO Max, Peacock and latterly discovery+, Netflix did not believe that competitive intensity materially changed in the first quarter of 2021 or was a material factor in the variance of performance in regions. Global growth was relatively steady even though the level of competitive intensity varied by country.
Going forward, Netflix cautioned that while it anticipated a strong second half with the return of new seasons of some of its biggest hits and “an exciting” film line-up, there would be a lighter content slate in the first half of 2021, and hence slower membership growth. Overall it predicted paid net additions of 1 million for the second quarter of the year, compared with 10 million in the quarter a year ago as the effects of the pandemic were being felt.
While UCAN and LATAM regions were expected to be roughly flattish in memberships, Netflix anticipated paid membership growth to re-accelerate in the second half of 2021 as it launched a back half slate with the return of big hits like Sex Education, The Witcher, La Casa de Papel (Money Heist) and You. Netflix said that it projected spending over $17 billion in cash on content over the course of 2021.
Moreover, it noted that while in the short-term, there would still be some uncertainty from Covid-19, in the long-term, the rise of streaming to replace linear TV around the world was the clear trend in entertainment.
