How Netflix Is Preparing To Combat The 'Lighter Content Slate' That Affected Q1 Growth

Netflix Inc NFLX is attributing a dip in subscriber growth to the coronavirus pandemic and a “lighter content slate,” which it plans to remedy by pumping cash into content.

What Happened: The subscription video-on-demand company said in its Q1 letter to shareholders that it believed “paid membership growth slowed due to the big Covid-19 pull forward in 2020 and a lighter content slate in the first half of this year, due to Covid-19 production delays.”

While some uncertainty due to COVID-19 persists, Netflix expects a strong second half with the return of new seasons of its “biggest hits and an exciting film lineup.”

In the long-term the company expects streaming to replace linear television around the world.

Returning franchises will dominate the second half, according to Netflix. The streamer disclosed it is producing safely in every major market with exception of Brazil and India amid an uneven global rollout of COVID-19 vaccines.

The company envisages a $17 billion spending in cash on content in 2021.

Netflix shares slumped 8.68% in the after-hours trading on Tuesday to $501.89 after closing the regular session almost 0.9% lower at $549.57.

Why It Matters: Netflix reported 208 million paid subscribers at the end of Q1, a 14% year-over-year increase but below the guidance figure of 210 million. 

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The streamer added 4 million paid subscribers in the first quarter, which is significantly below the 16 million it added in a similar period a year ago.

Netflix says it aims to create “great, locally authentic stories in all countries around the world.”

“We’re increasingly seeing that these local titles find significant audiences around the world,” said the company.

Still, Netflix may find that content alone won’t cut it, according to a recent survey from Deloitte.

While 35% of respondents polled by Deloitte gave importance to content, 46% said that “ow enough price was the most important factor in deciding to subscribe to a new paid streaming video service.”

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