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Netflix subscriptions slump a concern for investors

Netflix expecting to add a mere 1m users in the coming quarter

Netflix (NASDAQ:NFLX) has revealed that its growth in new subscriptions has taken a hit after lockdowns caused an initial upturn in viewers last year, while it also interrupted production of its major shows.

The group added less than four million users in the quarter just gone, two million down on its expectations, warning that it could add a mere one million users in the coming quarter.

The fall in subscriber growth could indicate that the trend of stocks performing well thanks to lockdowns is being reversed back as restrictions are eased.

The Nasdaq company’s revenue increased by 24% to $7.16b during the first three months of the year, bringing net income up to $1.71bn from $720m.

The company said: “We believe 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.”

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Russ Mould, investment director at AJ Bell, provided insight into the company’s news:

“One of the biggest threats to Netflix in 2021 is the great outdoors. People are bored of sitting at home under lockdown restrictions and many will have exhausted all the classic films and boxsets on Netflix by now. The flow of new films to streaming platforms is currently weak and Netflix, in particular, is really suffering from having unappealing new content,” Mould said.

“Cinema operators know that customers will only visit their screens if there are enticing films. The same applies to streaming providers – it’s all about content and Netflix’s proposition is diluted by having too many poor-quality shows. Disney Plus’s considerable success in the past few years has shown that quality rules over quantity.”

“Now that lockdown restrictions are slowly being eased, the appeal of signing up to Netflix is diminishing as there are alternative activities competing for individuals’ attention, namely pubs, restaurants, domestic travel and hopefully a greater range of leisure pursuits in time.”

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