Netflix earnings: Q3, 2020 - The audience demand driving the metrics

22 October, 2020

Parrot Analytics would like to share with you a summary of findings from our latest analysis concerning Netflix's Q3 performance.

As you know, Netflix added 2.2M global net subscribers per their recently released Q3 2020 report. This figure is just shy of their estimated gain for the quarter of 2.5M and fell short of analyst expectations that forecast the service’s growth in subscriber numbers would exceed Netflix’s own guidance.

This result follows two record quarters for global subscriber growth, largely attributed to positive impacts from the pandemic. The declining demand for Netflix’s top originals presaged weak subscriber growth this quarter.

Parrot Analytics - Key Findings:

  • While the main metric of paid net adds may have fallen short, in many ways this has been a solid quarter for Netflix, particularly in terms of retention. The effects of the ongoing extraordinary operating conditions caused by the global pandemic are likely still benefitting the streamer.
  • Several demand metrics relevant to subscriber retention, such as the demand decay rate, are trending upward. This shows that Netflix is improving on measures that keep subscribers coming back for more. Netflix itself noted that “retention remains healthy” in its shareholder letter.
  • As we have previously revealed, the demand for the most popular original series on a platform (tentpole series) is a powerful driver of new subscribers: Demand for tentpole series in one quarter drives subscriber growth in the next. Our latest Q3 Netflix analysis shows that demand for Netflix’s tentpole originals fell in the second quarter which anticipated the Q3 miss in forecast subscriber adds (chart 1). The subscribers miss was driven by weak subscriber acquisitions due to reduced demand for tentpole originals.

Chart 1


Our methodology:

Parrot Analytics works with the largest TV studios, networks and OTT platforms to enable better content decisions and we also partner with Guinness World Records to certify their global TV records.

Here is an overview of our methodology: 

We capture over 1 Billion new data points each day across the entire consumer activity spectrum, including video consumption (streaming and downloads), social media engagement (hashtags, liking, sharing) and research actions (reading about shows, writing about shows, etc.). In terms of downloading, just one of our many data sources, we hold the patent for deriving media usage according to consumer global peer-to-peer (P2P) activity:

Our Demand Rank system ensures that the important demand signals are weighted more heavily than others (e.g. watching or downloading a series). We use factors such as time as a key arbitrator, enabling us to filter out the “noise”, which results in a demand metric that is more than a measure of “buzz” (which the industry, as you know, has had access to via traditional social listening tools for many years now).
The more consumer effort required, the more importance is attached to each signal. Once all the signals are weighted and combined, the audience demand for each show almost anywhere in the world can be compared with that of any other show using our globally standardized metric.

How Parrot Analytics defines a digital original series:

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