Netflix has posted up to $1.7 billion in net profits for the first quarter ending March 31, 2021. This is according to the streaming giant’s Q1 2021 earnings report.
This $1.7 billion profit is the highest ever realised by the subscription video-on-demand (SVOD) company in a single quarter. For Q1 2021, Netflix’ revenue grew by 24% year-on-year (YoY) to $7.16 billion from $5.77 billion in Q1 2020.
Relative to Q4 2020, revenue increased by $520 million, up 8% quarter-on-quarter (QoQ) as more people watched on-demand content amid relaxed lockdowns globally.
During Q1 2021, Netflix added about 4 million paid subscribers to reach 208 million overall paid subscribers. This represents a 24% growth YoY but is less than 50% of the 8.51 million paid users added in the previous quarter, as subscriber growth effectively declined.
Africa Contributes a Meagre 0.32% of Netflix Revenue
Going by Netflix’s Q1 2021 report, paid memberships in the Europe, Middle East and Africa (EMEA) region increased by 1.81 million to 68.51 million. This saw average revenue per subscriber (ARPS) rise to $11.56 million.
According to a Digital TV Research study, Netflix currently has about 2 million subscribers in Africa.
Assuming these are all paid subscribers and using the ARPS of $11.56 million, this means that Netflix realised about $23.12 million from Africa, a paltry 0.32% of the SVOD’s total $7.16 billion revenue posted in the latest quarter.
As of Q1 2020, Digital TV Research estimated Netflix’s African subscribers at just over 1.4 million. While this shows that at least 600,000 more Africans have signed up to the streaming service within a year, the revenue contribution from the continent is massively dwarfed by that of regions like the US and Europe.
US and Canada (UCAN) accounted for 44% of Netflix’s total revenue in Q1 2021, followed by EMEA’s 33% ($2.34 billion).
This is reflective of the significantly low adoption of Netflix on the continent.
With Netflix reportedly planning to restrict password sharing, the number of African subscribers might decrease even further and as such cut down the revenue even more.
Price Hikes and Lower Costs Drive Profits up by 213%
Early this year, Netflix upwardly reviewed prices in major markets such as the United States (US) and the United Kingdom (UK). The increase in subscription prices led to a rise in the average revenue per user in these countries and subsequently drove up profits.
For Q1 2021, Netflix realised a profit of $1.7 billion, 213% more than the $541.8 million posted in Q4 2020.
The SVOD service had increased prices by at least $1 on standard and premium monthly plans for US and UK subscribers in January.
Moreover, despite a decline in paid subscribers’ growth, the significant reduction in operating costs contributed to Netflix’s all-time high quarterly profit for Q1 2021.
Operating costs fell by 7% to $3.87 million from $4.17 million in the past quarter. This was due to lesser content spend caused by COVID-19 delayed production and roll out of new seasons of some of Netflix’s biggest hits.
Going forward, Netflix is poised to add more paid subscribers but may not replicate Q1 profit due to higher operating costs.
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