Netflix Adds 2.5 Million Subscribers in Q3 2020 and Has 150 Productions in Progress Despite Pandemic

By Bruce Harpham Friday, October 23, 2020

Netflix added over two million subscribers in the second quarter of 2020. Despite that accomplishment, investors were disappointed. The company’s stock price fell from a high of approximately $540 on October 19 to $485 on October 22. Let’s take a closer look at the streaming giant’s financials.

Netflix Q2 2020—Subscriber Growth Slows, and Netflix Has $8 Billion in Cash

Released on October 20, Netflix’s Q2 2020 results reveal how the company has managed during the middle of 2020.

  • Net income reaches a new high. In Q3 2020, the company reported $789 million in net income. That’s $124 million higher than the third quarter of 2019. Looking at the first nine months of 2020, the company’s net income was $2.2 billion, more than $352 million higher than the same period in 2019.
  • Subscriber growth is flat in North America, growing elsewhere. From a quarter over quarter basis, paid subscribers in Canada and the United States barely increased (0.2% growth). This sluggish growth was offset by high growth in the Asia Pacific region, where the company’s subscriber growth went up 4.5% quarter over quarter. Industry analysts expected the company to add over 5 million new subscribers in the quarter compared to actual results of 2.5 million new subscribers.
  • Revenue per subscriber is flat in North America. Netflix customers are paying more for their subscribers, but the increase is minimal. In the North America region, average revenue per subscriber increased 2.4% in Q3 2020 versus last year. However, revenue per subscriber fell by 15% in the same period in Latin America.
  • Netflix’s cash continues to grow. Like Apple and other technology firms, Netflix’s cash keeps growing and growing. In Q2 2020, the company reported $8.3 billion in cash. That’s more than double the amount of cash the company had on hand at the start of 2019. Investors may be questioning whether Netflix management has a clear strategy to use its cash.

On a global basis, the company reported 195 million paying subscribers. By the end of 2020, Netflix management forecasts that it will reach 201 million active subscribers. In contrast, Disney+ reported approximately 60 million subscribers in August 2020. Ultimately, Q3 results disappointed investors because the company’s growth pace has slowed relative to the boom it enjoyed earlier in the year.

What About Netflix’s New Content Strategy?

Due to the COVID-19 pandemic, Netflix and others in the television and film industry have disrupted production. In mid-August, the company announced it was resuming production on “The Witcher,” the company’s answer to HBO’s Game of Thrones, a fantasy series. Furthermore, Netflix also suspended production of “Lucifer” in the spring of 2020. Delays to its fantasy and science fiction line up may cause the company to lose customers to Disney+, which is releasing a new season of the Star Wars TV show, “The Mandalorian.”

Despite the pandemic’s disruption to studios worldwide, Netflix has found ways to complete many productions in 2020. In a letter to shareholders, Netflix stated:

“Since the almost-global shutdown of production back in mid-March, we have already completed principal photography on 50+ productions and, while the course and impact of C-19 remains unpredictable, we’re optimistic we will complete shooting on over150 other productions by year-end.”

Three Reasons Why Q4 Earnings Could Be Better

While investors may have expected higher subscriber growth figures, future growth may grow further. On October 22, Quibi, a company that produced high-quality short video content, announced it was shutting down. With an estimated 1.5 million to 2 million subscribers at its height, Quibi was no behemoth in streaming. Yet Netflix may be able to bring more of those users to its service.

Aside from picking up additional subscribers, Netflix also has a significant pipeline of new content coming. Fans and critics are looking forward to the next season of The Crown, a 20th-century historical drama about the British royal family. The newest season, which is expected to feature Prince Charles and Princess Diana, will launch on November 15, 2020. In 2018, The Crown received 6 Emmy nominations and won two awards: Outstanding Lead Actress In A Drama Series and Oustanding Directing For A Drama Series.

Netflix is also planning content for the Christmas season. In November 2020, the company’s planned releases include Operation Christmas Drop, Elf Pets: Santa’s Reindeer Rescue, Christmas Break-In, A Christmas Catch, Christmas With A Prince, Dolly Parton’s Christmas on the Square, The Christmas Chronicles: Part Two, Sugar Rush Christmas: Season 2, and Spookley and the Christmas Kittens. The company’s steady release schedule of new seasonal content may help to keep the attention of families.

However, fans of the 1980s themed “Stranger Things” series will have to be patient. There is no official release date for the series’s next season. It could be delayed up to mid-2021.

About the Author


Headshot of Bruce Harpham

Bruce Harpham is an author and marketing consultant based in Canada. His first book "Project Managers At Work" shared real-world success lessons from NASA, Google, and other organizations. His articles have been published in CIO.com, InfoWorld, Canadian Business, and other organizations. Visit BruceHarpham.com for articles, interviews with tech leaders, and updates on future books.

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