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Netflix subscribers soar like crazy as coronavirus traps us at home

And Netflix says it won't be running out of new shows and movies anytime soon.

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- 02:42
Tiger King

Tiger King was one of Netflix's binge-watch phenoms in the latest quarter, which coincided with large swaths of Netflix membership being stuck at home. 

Netflix

Netflix added more new subscribers in the first three months of the year than it ever has before, record growth that will serve as a bellwether for how subscription streaming video may fare during the coronavirus pandemic. But even among its competitors, Netflix emerged as perhaps the best-positioned media company for this extraordinary time, confident that its eye-popping production pipeline will keep new shows and movies flowing onto the service into 2021, even as rivals' original programming is hobbled by global shutdowns. 

Because Netflix releases its series in its trademark binge-the-season model, dropping all episodes at once, it produces programming with more lead time than the rest of Hollywood. And Netflix's global nature means it has remote post-production locations to wrap up those shows and movies functioning all over the world. Netflix has already shot all its shows and movies for 2020, and now they're in post-production at locations globally working remotely. 

"We're actually pretty deep into our 2021 slate," Netfix's content chief Ted Sarandos said Tuesday in a discussion of the results later Tuesday. 

Meanwhile, at rivals, production shutdowns are seriously crimping the new material on offer, both now and down the line. For new streaming services like NBCUniversal's Peacock and AT&T's HBO Max, their launch slates of exclusive originals are down to a fraction of what they originally planned. Traditional networks, which rely more on live programming like sports and talk shows than Netflix does, are scrambling to figure out how they can get fresh material in front of viewers.

But Netflix, for example, has already finished shooting the fourth season of its historical drama The Crown, which is expected for release in late 2020. One of its marquee animated movies for the end of the year, Over the Moon, directed by animation legend Glen Keane, is in the finishing stages too. If Netflix does have to adjust its release plans somewhat, that won't happen until next year, Sarandos said.

Netflix -- the world's dominant streaming-video subscription service, operating basically everywhere except China -- added 15.77 million new members in the first quarter to 182.86 million total, the company reported in a Tuesday afternoon earnings report. That was double Netflix's January guidance for 7 million new members and the consensus analyst expectation for 7.5 million member additions, according to Thomson Reuters. 

With its stay-at-home model and massive pipeline of shows, Netflix is ideally positioned to boom as people stuck at home grow more desperate for entertainment. The coronavirus, which causes the respiratory disease known as COVID-19, has overwhelmed health care systems, triggered quarantines and stay-at-home orders, and forced entire industries to shut down. Entertainment has been no exception: Movie theaters are shuttered; big-budget films are being pushed back to next year; nobody knows when sports, concerts and theater can resume; and new film and TV productions are on hold for the foreseeable future. 

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"At Netflix, we're acutely aware that we are fortunate to have a service that is even more meaningful to people confined at home, and which we can operate remotely with minimal disruption in the short to medium term," the company said in its letter to shareholders Tuesday, as it characterized its higher viewing and increased membership growth as temporary.

"We expect viewing to decline and membership growth to decelerate as home confinement ends, which we hope is soon," it added. 

A new normal

In the midst of the soaring demand, Netflix said it has been dealing with "significant disruption" in customer support during the spike in demand, which it has been able to cope with by adding 2,000 work-from-home customer service agents. It also has had to ratchet back some of its alternate-language dubbing. 

New content production has essentially ground to a halt. "Almost all filming has now been stopped globally, with the exception of a few countries like Korea and Iceland," Netflix said. The company has been able to move more than 200 projects in post-production to be continued remotely. And some of its production teams can produce new work remotely as well. Within two weeks of the shelter-in-place orders in Los Angeles, most of Netflix's animation production team was back up and running, working from home.

Still, as Sarandos stressed multiple times, the company expects to release all of its originally planned shows and films in the first half of the year, without much deviation until next year. Netflix is also acquiring already-completed movies made by other companies that are now stuck without theaters to debut them. That includes its recent deal to stream indie comedy The Lovebirds starring Issa Rae and Kumail Nanjiani and a Sherlock Holmes spinoff movie, Enola Holmes, starring Millie Bobbie Brown. 

"While we're certainly impacted by the global production pause, we expect to continue to be able to provide a terrific variety of new titles throughout 2020 and 2021," Netflix said.

As has become the norm, Netflix bragged about the popularity of some of its programs in the latest quarter. Among the viewership stats it dropped: Action-comedy movie Spenser Confidential was watched by 85 million households in its first four weeks; season four of Spanish language thriller series La Casa de Papel, or Money Heist, is projected to hit 65 million households in its first four weeks; and docu-series Tiger King was watched by 64 million in its first four weeks. 

Netflix counts a title as "watched" if you choose to watch it and let it play for two minutes; its viewership stats aren't independently verified. 

A tip of the hat to Disney Plus 

The news also comes in the midst of the streaming wars, a seven-month window when media and tech giants are rolling out waves of new services. Chief among the upstarts has been Disney Plus, which launched Nov. 12 and has quickly ramped up to 50 million subscriber in five months. The winners of the streaming wars will not only shape the future of TV in the streaming age, but also influence how many services you have to pay for to watch your favorite shows and movies.

Netflix CEO Reed Hastings called Disney Plus' success "stunning."

"Over, 20 years of watching different businesses incumbents, like Blockbuster and Walmart and all these companies, I have never seen such a good execution of the incumbent learning the new way and mastering it," he said. "My hat's off to them."

In the US and Canada, its biggest single region, Netflix added 2.3 million streaming customers, for a total of nearly 70 million. In Europe, Middle East and Africa, it added 6.96 million new members, hitting 58.73 million total. In Latin America, its new members increased 2.9 million to 34.32 million. And in the Asia Pacific region, new subscribers increased 3.6 million to 19.84 million.

Looking ahead to the second quarter, Netflix expects to add 7.5 million streaming members overall. Analysts' consensus estimate was for Netflix to predict 4.2 million.

Netflix also predicted $1.81 per share in earnings in the second quarter. On average, Wall Street analysts who track Netflix expect $1.54.

Overall, Netflix reported a profit of $709.1 million, or $1.57 a share, compared with $344.1 million, or 76 cents a share, a year earlier. Revenue climbed 28% percent to $5.77 billion.

Analysts on average expected per-share profit of $1.65 -- compared with Netflix's guidance for $1.65 -- and $5.762 billion in revenue.