Netflix shares dropped on Wednesday after a disappointing earnings quarter.
Bloomberg reports that Netflix shares tumbled as much as 8 percent on Wednesday, erasing $20 billion USD off the streaming platform’s market capitalization.
The selloff came after the company reported it had added fewer subscribers than expected last quarter, and warned of further weakness. Netflix added 4 million net new subscribers in the first quarter of 2021, bringing its total subscriber base to 207.6 million, according to its latest earnings report.
The low turnout can be attributed to the COVID vaccine rollout that has facilitated the reopening of global economies. Furthermore, a significant number of people have returned to their work and those staying at home are working remotely, thus reducing the paid subscribers.
While the streaming market has become more competitive, Netflix suggested that its lackluster growth had less to do with “competitive intensity” and more with the simple fact that it released fewer original shows and movies, thanks to pandemic-related production delays.
“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,” the company said.
“We continue to anticipate a strong second half with the return of new seasons of some of our biggest hits and an exciting film lineup. In the short term, there is some uncertainty from COVID-19; in the long term, the rise of streaming to replace linear TV around the world is the clear trend in entertainment,” the streaming giant continued.
Going forward, the company expects its business to pick up should the Covid vaccine development and rollout slow down due to approval processes.
“As we’ve noted previously, the production delays from COVID-19 in 2020 will lead to a 2021 slate that is more heavily second-half weighted with a large number of returning franchises,” the company said.