CALIFORNIA, US – Netflix has recently revealed its Q1 2020 earnings with a Letter to Shareholders and an executive interview of its leaders. As people are confined in their homes all over the world to practice social distancing, Netflix shared that paid membership has grown by 15.8M this quarter to a total of 183M (19.8M from APAC, 62% from outside of the US), a 22.8% year-over-year increase that was higher than forecast.
A whopping $5.8B in total revenue was also recorded, up 29% during the same period last year, which the platform shared was in-line with its guidance ue to the appreciation in the US dollar vs. other currencies. APAC contributed $484 million to the revenue in Q1, up 51.3% year-over-year.
Below is an extract from the letter which outlines the impact of Covid-19 on Netflix:
In our 20+ year history, we have never seen a future more uncertain or unsettling. The coronavirus has reached every corner of the world and, in the absence of a widespread treatment or vaccine, no one knows how or when this terrible crisis will end. What’s clear is the escalating human cost in terms of lost lives and lost jobs, with tens of millions of people now out of work.
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. Like other home entertainment services, we’re seeing temporarily higher viewing and increased membership growth. In our case, this is offset by a sharply stronger US dollar, depressing our international revenue, resulting in revenue-as-forecast. We expect viewing to decline and membership growth to decelerate as home confinement ends, which we hope is soon.
By helping people connect with stories they love, we are able to provide comfort and escape as well as a sense of community during this pandemic. So our focus has been on maintaining the quality of our service while our employees around the world adapt to working from home.
For the most part, this has gone smoothly. Our product teams, for example, have been relatively unaffected. As a precaution, we have temporarily reduced the number of product innovations we try, while continuing to release features that we know will add meaningful value for our members, such as improved parental controls.
However, we have seen significant disruption when it comes to customer support and content production. On the customer support side, we’ve now fixed most of our work-from-home challenges. In addition, we’ve taken on another 2,000 agents (all working remotely), so our customer service levels are almost fully restored despite the increased demand.
When it comes to production, almost all filming has now been stopped globally, with the exception of a few countries like Korea and Iceland. This has been devastating for millions of workers in the TV and film industry – electricians, hair and make-up artists, carpenters and drivers who are often paid hourly wages and work project-to-project.
In March, we created a $100 million fund to help with hardship in the industry, starting with the hardest hit workers on our productions, where Netflix has the greatest responsibility. We will have paid these crews for about seven weeks, with the goal of providing a bridge until government safety nets kick in. In addition, we’re donating $30 million to third parties and non-profits, providing emergency relief to out-of-work crew and cast across the broader TV and film industry in countries where we have a large production base.
This includes donations of $1 million each to the SAG-AFTRA Foundation COVID-19 Disaster Fund, the Motion Picture and Television Fund and the Actors Fund Emergency Assistance in the US, and $1 million between the AFC and Fondation des Artistes in Canada. These are all well established hardship funds. In other countries where no such funds exist, we’ve been working to set them up, including in the UK (£1 million) with the British Film Institute, in Italy (€1 million) with the Italian Film Commission, in France (€1 million) with Audiens, in Brazil (R$5 million) with the Brazilian Institute of Audiovisual Content, in Mexico ($1 million) with the Mexican Academy of Film Arts and Sciences, in Spain (€1 million) with the Ministry of Culture and Sport, Accion Cultural and the Film Academy and in the Netherlands (€1 million) with the Netherlands Film Fund.
In total, we have committed to spend $150 million supporting the industry through this crisis.
Netflix’s culture is designed to empower decision making at all levels of the company. Throughout this crisis, our employees have been working tirelessly to maintain the quality of our service and to find quick, practical solutions to the problems Netflix and our partners face.
For example, within two weeks of the shelter-in-place orders coming into effect in Los Angeles, most of our animation production team was back up and running, working from home. On the post production side, we’ve been able to get 200+ projects going remotely. Most of our series writers’ rooms are operating virtually. However, we’ve been unable to create dubs in Italian and some other languages due to home confinement of our voice talent for a handful of titles launching in April and May. But we hope that with the help of guilds around the world, voice actors can be set up from home, ensuring that they can stay safe and continue to earn a living. Similar efforts are underway for both music and visual effects.
This pandemic has demonstrated the importance of a strong Internet like never before. Over the years, we’ve invested heavily in Open Connect, a pioneering caching system that puts our library of content as close to members’ homes as possible. This enables ISPs to run their networks more efficiently and at a lower cost. However, given the surge in internet use, networks in some countries have struggled to cope.
In March, we were asked by a number of governments and ISPs to temporarily reduce the network traffic of our members. Using our Open Connect technology, our engineering team was able to respond immediately, reducing network use by 25 percent virtually overnight in those countries, while also substantially maintaining the quality of our service, including in higher definition. We’re now working with ISPs to help increase capacity so that we can lift these limitations as conditions improve.
Netflix employees have been outstanding and to help them support their local communities, we’ve doubled our charitable match giving program for 2020. So for every $1 donated by our employees to an organization, we now donate an additional $2 to that organization.
Last, and most important of all, we want to say thank you on behalf of all our employees to the heroic doctors, nurses and first responders fighting this pandemic on the frontlines and the grocery, restaurant and other essential workers who take risks to make sure our families are fed and taken care of. We are truly inspired and humbled by you.
