Netflix and Disney+ Report Revenue Increase for 1Q20

In today’s world, it is no wonder Netflix’s 1Q20 results were much better than anticipated. Headquartered in Los Gatos, California, Netflix, the American media-services provider and production company, had initially tallied 7 million net paid subscribers (before the COVID-19 crisis) for its released earnings. Nevertheless, the company more than doubled its prognostics and landed 15.77 million paid net additions. The company now reports a total of 182.6 million paid subscribers.

The numbers are in. Netflix reported revenue of US$5.77 billion and earnings per share of US$1.57, very much in line with Wall Street revenue predictions. In a letter to investors, the company explains how COVID-19 has impacted its finances. “First, our membership growth has temporarily accelerated due to home confinement. Second, our international revenue will be less than previously forecast due to the dollar rising sharply. Third, due to the production shutdown, some cash spending on content will be delayed, improving our free cash flow, and some title releases will be delayed, typically by a quarter.”

Nevertheless, the company expects this growth to be temporarily, considering it as a short-term spike, due to the likelihood that world governments will be lifting home confinement in the short term. Netflix is forecasting roughly 7.5 million global net additions in 2Q20.

Netflix is contemplating modifications to its content plans due to a cease in movie and tv productions.  “No one knows how long it will be until we can safely restart physical production in various countries and, once we can, what international travel will be possible and how negotiations for various resources (e.g., talent, stages and post-production) will play out,” says the investor letter. “The impact on us is less cash spending this year as some content projects are pushed out. We are working hard to complete the content we know our members want and we are complementing this effort with additional licensed films and series.” The letter also states the launching in this quarter of announced acquisitions such as: Kumail Nanjiani-Issa Rae comedy “The Lovebirds,” the Millie Bobby Brown mystery “Enola Holmes” and new shows like “Space Force” and “Hollywood.”

In a recent earnings interview, Chief Content Officer Ted Sarandos explains how working processes for Netflix and its production partners have drastically changed due to the pandemic. “Our productions, our post productions, our offices are now distributed into people’s living rooms and bedrooms and kitchens around the world,” Sarandos said. “It is just an incredible testimony to the innovation that literally within a few hours, but certainly within a few days of the shutdowns, we had production up and running remotely, post-production up and running remotely, animation up and running remotely, pitch meetings happening virtually, writers rooms assembling virtually.”

Another company that is riding the COVID-19 wave is Walt Disney Company. It recently announced that its streaming service Disney+ has more than 50 million subscribers. According to the company, the service was launched less than five months ago and had 28.6 million subscribers as of February 3. Disney+ has had much success worldwide. Just in the past two weeks it launched in the UK, Ireland, France, Germany, Italy, Spain, Austria and Switzerland. The company has now 8 million subscribers in India, where Disney+ launched at the beginning of April.

“We’re truly humbled that Disney+ is resonating with millions around the globe and believe this bodes well for our continued expansion throughout Western Europe and into Japan and all of Latin America later this year,” said Kevin Mayer, Chairman of Disney’s direct-to-consumer and international business, in a statement. Disney+ has had much success with films like “Frozen 2,” “Onward” and expects to receive a great viewership with the soon to be released “Artemis Fowl.”

The pandemic has definitely triggered an upward trend in demand for video streaming and conferencing. This has resulted in people using over-the-top (OTT) services reports GlobalData, a data and analytics company. Aurojyoti Bose, Lead Analyst at GlobalData, comments: “For the foreseeable future, entertainment services such as Netflix, Disney+, Hulu and Amazon Prime will rack up millions of subscribers as self-isolation and stay at home orders will fuel the demand for in-home entertainment. Newer apps such as Peacock, Quibi and HBO Max have also been given the perfect opportunity to showcase their offerings, as viewers tend to relish novel content.”

GlobalData reports that Google search trends for Amazon Prime Video, Disney+, Netflix and Hulu rose by more than 60 percent in March 2020 when compared to February 2020. This is due to sporting events being called off and therefore customers only having the option of streaming TV shows and movies.

“There has been such a huge rise in demand that OTT companies have decided to reduce bandwidth to mitigate network load,” says Bose.

Another industry that has taken advantage of the pandemic are video conferencing apps such as Zoom. According to the company, daily users rose to 200 million in March 2020 when compared to 10 million in December 2019. “The use of Google Hangouts has also risen,” reports Bose.

While COVID-19 takes the world by storm, video and audio streaming giants are cashing in.