US video streaming service provider Netflix announced its financial report today, stating that the company’s revenue for the first quarter of 2021 was 7.163 billion U.S. dollars, an increase of 24.2% from the 5.768 billion U.S. dollars in the same period last year; net profit It was US$1.707 billion, an increase of 141% from US$709 million in the same period last year.
After the earnings report was released, Netflix Co-CEO Read Hastings (Read Hastings), Co-CEO and Chief Content Officer Ted Sarandos (Ted Sarandos), COO and Chief Product Officer Greg Peters ( Greg Peters), CFO Spencer Neumann (Spencer Neumann) and Vice President of Investor Relations Spencer Wang (Spencer Wang) and other company executives attended the subsequent earnings conference call, interpreted the key points of the earnings report, and answered Fidelity Investment analyst Nidhi Gupta asked.
The following is the main content of the analyst Q&A session of this conference call:
Nidhi Gupta: The company’s paid subscribers increased by 16 million in the first quarter of last year. However, the growth in the first quarter of this year seems to be less than the company’s and Wall Street analysts’ expectations. Can executives analyze the reasons?
Spencer Newman: The situation in the first quarter is mainly related to the epidemic. The impact of the epidemic on the world is still great. The company’s paying users have not increased much, which also reflects the short-term fluctuations in the overall development trend. Last year, the company’s paying users increased by nearly 40 million, and a large part of the growth was released early. In addition, due to the epidemic control measures, our production has been affected since last year. Although we have made some adjustments and gradually resumed work in this area, many contents will still be postponed to later this year. These circumstances make it difficult for us to make a very accurate forecast of the quarterly growth of paying users. On the second page of the financial report, we also compared the deviation between the company’s internal forecast of the number of users and the actual situation in recent years. Because it is a forecast, there will definitely be a deviation, whether it is more or less. Throughout the past five years, the biggest forecast deviation appeared in the past five quarters. The seasons where the epidemic is raging make it difficult for us to grasp the forecast, but the key is that the company still maintains a healthy operation, including per-paying household content. Viewing volume increased year-on-year in the first quarter, and the user churn rate decreased year-on-year. The overall business is still growing, from 150 million users two years ago to 210 million currently, a growth of nearly 40%, which is similar to the increase in the past few years. The reason is that the market trend of users moving from TV to streaming media has not changed, so although there will be interference factors that cause short-term growth fluctuations, the long-term growth trend is still very clear.
Reed Hastings: The company’s user growth has been very stable over the past ten years, and there are some fluctuations at the moment. We are also asking ourselves: “Are you sure it is not because of market competition?” Because our recent market competition is still becoming fierce. But when we browse different data, including operating data in different regions, business expansion of competitors, etc., we still see little change, and the company’s growth is still in line with the big market trend. This is also very confident for us. Competition has always existed. We have been competing with Amazon Prime for more than 13 years. We have been competing with Hulu for 14 years. The competition with TV is still there. However, we have not detected changes in the overall competitive situation. We have been very fierce in the future. It will still be very intense.
Nidhi Gupta: I’m very happy to hear that the company’s user churn rate has declined, and there have been price increases in some markets in the fourth quarter and the first quarter of this year. Under the current market conditions, how do users absorb these price increases?
Greg Peters: What we have seen is similar to the situation in the past two years. The company continues to adopt a wise investment strategy to produce excellent and diversified content and provide high-quality content for different regions. The company has also increased investment in improving product experience, allowing users to get more happiness and value. If we do well in these areas, we can periodically increase the price of our services. In terms of providing entertainment value, we have been doing very well and have a very large competitive advantage in the market.
Spencer Newman: In terms of user churn rate, the current churn rate in the U.S. market is lower than before the price increase, and the same trend has also appeared in other regions where we have just raised prices.
Nidhi Gupta: Can you predict how the company’s user growth will change when the epidemic is better controlled?
Reed Hastings: Unfortunately, due to the changes in the epidemic, some countries have reclosed their cities after restarting in the past year. Some regions are experiencing real moments of crisis. Of course, the United States is more fortunate. Among the countries. Looking back at the data, when the epidemic first broke out, the number of users and the number of views both increased tremendously. However, after that, there have been multiple rounds of lockdowns and restarts, including the prevention and control of the Christmas holidays in the United States. The number of views has a very large and substantial impact, so we don’t think it will have much impact on the future restart or the closure of the city again, including the current rapid increase in the number of confirmed cases. We have not seen anything. Big impact.
Spencer Newman: Regarding the outlook for the second quarter, we have seen the same situation in the same quarter. The second quarter will continue to be affected by the early release of user growth, and will also be affected by the delayed content launch. In addition, the second quarter is also traditional Significant off-season, but the core data is still very good, and there are also catalysts for re-accelerating business growth, so the long-term outlook is still very good.
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