By Joe Flint and Micah Maidenberg
Netflix Inc. said subscriber growth for the first quarter was weaker than expected, a potential warning sign for the company as consumers in many countries start to emerge from pandemic-related lockdowns and as streaming competition increases.
The company on Tuesday said it added another four million subscribers on a net basis globally between January and March, fewer than its forecast of six million.
"It's just a little wobbly right now," Netflix Chairman and Co-Chief Executive Reed Hastings said on the company's video call to discuss results.
Netflix shares were 8.4% lower in after-hours trading. The stock is up nearly 26% over the last 12 months.
The subscriber gain in the first quarter was far below the 15.8 million increase from a year earlier, when the spread of the coronavirus was first intensifying and people were homebound and bingeing on content.
"There's a boost in engagement that you get when people are in a lockdown situation," Netflix operations chief Gregory Peters said at an investor event last month.
Netflix said in a letter to shareholders it believed subscriber "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."
Increased competition from Walt Disney Co.'s Disney+, AT&T Inc.'s HBO Max and other streaming services didn't play a part in the company missing its estimates, Netflix said.
"There's no real change that we can detect in the competitive environment" that would have affected the results, Mr. Hastings said. "We really looked through all the data, and we just can't see any difference."
Netflix said it expects subscriber growth to pick up in the second half of the year, when some of its more successful shows return with fresh episodes, including "The Witcher" and "You." Netflix projected it will spend more than $17 billion on content this year.
"A lot of the projects we hoped to get out earlier did get pushed," said Ted Sarandos, Netflix co-CEO and chief content officer.
In recent weeks, Netflix has also made moves to shore up its content through acquisitions and licensing deals. It struck a five-year deal valued at well over $1 billion with Sony Pictures Entertainment for streaming rights to the studio's theatrical releases starting in 2022. It also spent $440 million for the rights to make two sequels to the film "Knives Out" starring Daniel Craig.
As part of the Sony pact, the two companies will also create original content for the streaming service.
Netflix said it would commence a stock buyback program this quarter, and has authorized up to $5 billion in buybacks.
The company reported a quarterly profit of $1.71 billion, or $3.75 a share, compared with $542.2 million, or $1.19 a share, for the year-earlier period. Revenue rose to $7.16 billion from $6.64 billion.
Netflix had forecast $1.36 billion in net income and $7.13 billion in revenue for the period.
For the first quarter, subscribers in markets overseas continued to drive growth. Netflix reported gaining 1.8 million new subscribers in the region that includes Europe and the Middle East and 1.4 million across Asia. Subscriptions in Latin America increased by 360,00 and in the U.S. and Canada by 450,000.
Mr. Hastings said Netflix has Japan and South Korea "wired" in terms of content. In India, he said, "we're still figuring out."
The company ended March with almost 208 million subscribers world-wide. It said it expected to add another one million new subscribers in the second quarter, compared with more than 10 million for the year-earlier quarter.
Many consumers who get vaccinated are venturing out of their homes more and shifting spending despite the lingering threat posed by coronavirus. Airlines are looking for a resurgence in summer travel. Movie theaters and other venues have reopened in New York, Los Angeles and elsewhere. Restaurants and hotels, both hard hit by pandemic-related closures and restrictions, have stepped up hiring.
Netflix made a number of changes last year amid the surge in new subscribers. The company said in July that it promoted Mr. Sarandos to co-chief executive. In October, Netflix boosted the monthly price of its most popular streaming plan by $1 to $13.99 a month, and its premium offering by $2 to $17.99 a month.
Last month, the company also began experimenting with greater password enforcement to prevent users from sharing their accounts. But Mr. Hastings said the company would never roll out an initiative that feels like "turning the screw" on consumers regarding password-sharing.
Creatively, Netflix has been on a roll. Its movies received 36 Oscar nominations, including two for best picture -- "Mank" and "The Trial of the Chicago 7." The Oscars will be telecast this Sunday.
Write to Joe Flint at email@example.com and Micah Maidenberg at firstname.lastname@example.org
(END) Dow Jones Newswires
April 20, 2021 19:19 ET (23:19 GMT)Copyright (c) 2021 Dow Jones & Company, Inc.