Coronavirus has three effects on businesses

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Netflix co-founder and CEO Reed Hastings attends a question and answer session at a transatlantic forum in Lille, France.

Sylvain Lefevre | Getty Images

Netflix released its first quarter 2020 results on Tuesday. In a letter to shareholders, the company said the coronavirus crisis is affecting its business in three ways.

“First, our workforce growth has temporarily accelerated due to home isolation,” said Netflix. “Second, our international revenues will be lower than previously forecast due to the sharp rise in the dollar. Third, due to the shutdown of production, some cash spending on content will be delayed, improving our free cash flow, and some release of titles will be delayed, usually by a quarter. ”

Social distances increase in subscriptions

Netflix has said it expects subscriptions and viewership to increase when people stay at home, but subscription growth will likely decline once social distancing mandates are relaxed.

The company said it added 15.77 million paying international subscribers, compared to the 7.2 million expected on Wall Street. He said he plans to add 7.5 million global subscribers in the second quarter, but “given the uncertainty over the home containment schedule, this is mostly guesswork.

“The actual figures for the second quarter could be well below or above that depending on many factors, including when people can resume their social lives in various countries and how many people take a break from television after the lockout, “said Netflix.

“Hopefully progress against the virus will allow governments to quickly lift home containment. In this case, we expect viewing and growth to decline, ”said the company.

A stronger US dollar affects international prices

Netflix expects a stronger U.S. dollar, in part due to the pandemic, to curb the growth of international revenues.

The company cited Brazil as an example, where its standard subscription plan cost $ 8.50 a month but is now $ 6.50 a month due to April 2020 exchange rates.

This drop in the average subscription price is offsetting the growth of its members, said Netflix.

Coronavirus has halted production

The Covid-19 pandemic also caused Netflix to suspend the majority of its production worldwide due to blockages and government recommendations.

Netflix said it would only have a “modest” impact on its new releases in the second quarter, although the company cannot predict when production will resume.

“No one knows how long it will take before we can safely restart physical production in various countries, and, once we can, what international travel will be possible, and how negotiations for various resources (for example, talent, stages and post-production)) will play out, “said Netflix.

Shares in the streaming platform jumped 10% before leveling off around a 1% bump in after-hours trading.

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