SAN FRANCISCO –
Netflix has suffered its first loss of subscribers in more than a decade, causing its shares to fall 25% in long-term trading amid fears that the pioneering streaming service may have already seen its best days.
The company’s customer base fell by 200,000 subscribers in January-March, according to its quarterly earnings report released on Tuesday. This is the first time Netflix subscribers have declined since streaming became available in much of the world outside of China six years ago. The decline this year is due in part to Netflix’s decision to withdraw from Russia to protest the war against Ukraine, which has led to the loss of 700,000 subscribers.
Netflix acknowledged that its problems are deeply rooted, predicting the loss of another 2 million subscribers in April-June.
If the decline continues until the regular trading session on Wednesday, Netflix shares will lose more than half of their value so far this year – destroying about $ 150 billion in shareholder wealth in less than four months.
Netflix hopes to turn the tide by taking steps it has previously opposed, including blocking account sharing and introducing a cheaper – and ad-supported – version of its service.
Aptus Capital Advisors analyst David Wagner said it was now clear that Netflix was facing an impressive challenge. “They are in someone’s land,” Wagner wrote in a research note Tuesday.
Netflix took the brunt of the loss of 800,000 subscribers in 2011 as a result of unveiled plans to start charging separately for the then-emerging streaming service, which was included for free in its traditional DVD mail service. The reaction of customers to this move caused an apology from Netflix CEO Reid Hastings for the failure of the separation.
The recent loss of subscribers was much worse than the Netflix management’s forecast of a conservative profit of 2.5 million subscribers. The news exacerbates the growing problems for streaming since the influx of registrations from captive audiences during the pandemic began to slow.
This is the fourth time in the last five quarters that Netflix subscriber growth has fallen below previous year’s earnings, an ailment exacerbated by growing competition from well-funded competitors such as Apple and Walt Disney.
The failure follows the company’s addition of 18.2 million subscribers in 2021, its weakest annual growth since 2016. This contrasts with the increase of 36 million subscribers in 2020, when people were locked up at home and starved for fun, which Netflix was able to quickly and easily secure its stock of original programming.
Netflix previously predicted that it would regain momentum, but on Tuesday faced problems that are sinking it. “COVID has made a lot of noise about how to read the situation,” Hastings said in a video conference, reviewing the latest figures.
Among other things, Hastings confirmed that Netflix will start fighting password-sharing, which has allowed several households to access their service from a single account, with changes likely to be introduced next year.
Los Gatos, California, estimates that about 100 million households worldwide view the service for free using a friend’s or other family member’s account, including 30 million in the United States and Canada. “That’s over 100 million households already choosing to watch Netflix,” Hastings said. “They love the service. We just have to get paid for them to some extent. “
To stop the practice and encourage more people to pay for their own accounts, Netflix said it would expand a test introduced last month in Chile, Peru and Costa Rica that allows subscribers to add up to two people living outside their households. to your accounts for an additional fee.
Netflix ended March with 221.6 million subscribers worldwide. The drop in subscribers cut Netflix’s finances in the first quarter, when the company’s profit fell 6% from last year to $ 1.6 billion, or $ 3.53 per share. Revenue rose 10 percent from a year earlier to nearly $ 7.9 billion.
As the pandemic eases, people are finding other things to do, and other video streaming services are working hard to entice new viewers with their own award-winning programming. Apple, for example, had the exclusive streaming rights to CODA, which overtook Netflix’s Dog Power, among other films, to win Best Picture at the Oscars last month.
Escalating inflation over the past year has also shrunk household budgets, prompting more consumers to control their spending on discretionary items. Despite this pressure, Netflix recently raised prices in the United States, which has the highest household penetration – and where it has had the most problems finding more subscribers. Netflix lost 640,000 subscribers in the United States and Canada in the last quarter, prompting management to point out that most of its future growth will come in international markets.
Netflix is also trying to give people another reason to subscribe by adding video games at no extra charge – a feature that began to be introduced last year.
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