Netflix Sustains Steady Growth... Aiming to Improve Operating Profit Margin

Q1 Operating Profit Increased 108.7% Year-on-Year to $960 Million

[Asia Economy Reporter Kum Boryeong] Netflix is analyzed to continue driving steady growth.

According to Shin Young Securities on the 30th, Netflix's revenue and operating profit for the first quarter of this year recorded $5.77 billion and $960 million, respectively, up 27.6% and 108.7% compared to the same period last year.

Netflix is a global online video service (OTT) leader based in the United States. As of the first quarter of this year, it secured 180 million global paid subscribers. It has been steadily growing by more than 20% each quarter.

Shin Suyeon, a researcher at Shin Young Securities, explained, "OTT services are expected to steadily grow in market size due to service diversification following the growth of global digital channels," adding, "While the revenue scale is largest in the order of the US & Canada, Europe, Middle East & Africa, South America, and Asia, the revenue growth rate in the Asia region is the highest and noteworthy."

Despite the novel coronavirus disease (COVID-19), the stock price showed a positive trend, significantly outperforming the US media industry stock returns. Researcher Shin said, "It is judged that the benefits from changes in users' lifestyles due to difficulties in going out caused by COVID-19 and the advantage of being a single OTT service business worked," adding, "The fact that the number of paid subscribers increases by more than 20% every quarter is also positive."

Although competition in the OTT market is intensifying, Netflix is responding by expanding investment in original content. The planned investment in original content this year is known to be a total of $17.3 billion (20 trillion KRW). The number of original series and movie works to be released after next month is about 70. Despite large-scale investment execution, Netflix's target operating profit margin for this year is 16%. Compared to last year (12.9%), it aims for an improvement of 3.1 percentage points. Researcher Shin analyzed, "Netflix's popularity factor is judged to be content competitiveness," and "Through this year's target operating profit margin, confidence in performance improvement in the growing market can be confirmed."