Netflix had a great first quarter 2020, spurred on by COVID-19 shelter-in-place viewing. What is the secret to Netflix success, and can it keep the magic coming in the second quarter and beyond?
Chapter 1: Netflix has a great first quarter (2:30)
Will runs down the topline Q1 2020 numbers for Netflix. He also explains how different the results were from what we expected to happen. The tail end of 2019 suggested Netflix might not grow at all in the U.S. in 2020. In other words, shelter-in-place orders have entirely rewritten the script for Netflix in the first half of 2020.
Chapter 2: How Netflix grew to reach more than half of U.S. homes (5:00)
Analyzing the U.S. and Canada numbers more deeply reveals that Netflix passed the 50% penetration barrier in the U.S. during Q2 2020. It is an amazing achievement when you consider few people thought the company would even eclipse HBO penetration when it first got started streaming over ten years ago. I discuss how Netflix reached such deep penetration in the U.S. and how it has been the go-to service as people stay home during the C-19 crisis.
Chapter 3: Why growth in the U.S. was so much stronger than expected (10:10)
Will explains how the deep library and variety of content played into Netflix’s Q1 success. It helped attract new customers, but perhaps a more significant effect was the reduction in cancellations.
Chapter 4: The outlook for Q2 2020 (11:50)
Will discusses what Netflix is forecasting to happen in the second quarter. The company remains quite bullish, though company executives do not think subscriber gains will be anything like what happened in the first quarter.
I look at how well Netflix is positioned to perform in Q2 and beyond. I explain why its policy of dropping new episodes of a show all at once means it will continue to have new content while many others do not. If there is a single secret to Netflix success, the company’s approach to content production is probably it.
Chapter 5: Move toward comfort viewing could aid Netflix competition (19:00)
In the beginning, NBCU says that Peacock will not have any originals. Instead, it will provide lots of classics and viewer favorites. Will thinks that will guarantee it a seat at the viewing table as people continue to shift viewing from live news to less distressing fare, like comfort viewing.
While that may be right, services without new content are vulnerable to what Will calls “spinning.” Viewers can turn them off when they are finally able to leave their homes again. However, if they want something new to watch, they will still need Netflix. The halt in production may see others struggle to deliver original content before 2021.