Netflix shares slide after its loses 200,000 subscribers

Netflix shares fell after the streaming service suffered its first loss of subscribers in more than a decade.

The company’s customer base fell by 200,000 subscribers during the January-March period, the company revealed on Tuesday in the release of its latest earnings report. Netflix stock prices fell more than 27% to $ 252.90 ahead of trading on Wednesday as investors worried about the company’s slowdown in growth and growing competition.

The drop in subscribers is the first since Netflix was available in most parts of the world outside of China six years ago. This year’s fall comes in part Netflix’s decision to withdraw from Russia to protest war against Ukraineresulting in a loss of 700,000 subscribers.

However, Netflix acknowledged that its problems are deeply rooted in projecting a loss of 2 million more subscribers during the April-June period.

The company posted revenue of nearly $ 7.9 billion during the period, slightly below Wall Street forecasts. For the current quarter ending in July, Netflix said it expects revenue of just over $ 8 billion. Analysts polled by Zacks expected revenue of $ 8.2 billion.

A series of descents

If the fall in shares extends to Wednesday’s regular trading session, Netflix shares will have lost more than half of their value so far this year, removing about $ 150 billion in wealth from shareholders in less than four months.

Netflix also lost 800,000 subscribers in 2011 after it introduced plans to start charging separately for its nascent real-time playback service, which had been included for free with its traditional DVD mail service. The customer’s reaction to this move led to an apology from Netflix CEO Reed Hastings for failing to run the spin-off.

The service also experienced a decline in U.S. subscribers in 2019.

But the latest subscriber loss was far worse than Netflix’s management forecast for a conservative gain of 2.5 million subscribers. The news deepens the problems that have been increasing for the transmission since the increase in enrollment of a captive audience during the pandemic began to decline.

Netflix is ​​losing subscribers amid rising competition in online programming from Amazon, Apple, Disney and many other services.

The streaming industry “is more saturated and full of a multitude of services that offer attractive content at lower prices than NFLX, including deep-pocketed mega-technology platforms,” ​​Oppenheimer’s analysts wrote in a note.

Slow growth

This is the fourth time in the last five quarters that Netflix subscriber growth has fallen below last year’s earnings. Investors now fear that their streaming service may be embroiled in discomfort as it faces stiff competition from well-funded rivals such as Apple and Walt Disney.

“Netflix remains the most dominant player in the streaming industry, especially in the demand for original content,” Parrot Analytics, a company that analyzes streaming content, said in an email. “But as several nearly 100-year-old companies erode the headline market share, Netflix is ​​reaching a point where it needs to focus more on subscriber retention, especially in North America, while its historic competitors backed “Disney + and HBO Max continue to focus on subscribers. Growth in key international territories.”

Last year, Netflix had its own weaker annual earnings since 2016, totaling 18.2 million subscribers. This contrasted with an increase of 36 million subscribers during 2020 when people were locked up at home and starving themselves for entertainment, which Netflix was able to provide quickly and easily with its original programming reservation.

Password suppression

Netflix had previously predicted that it would regain momentum, but is now beginning to acknowledge that it is plunged into serious discomfort that requires action. Among other things, Netflix noted that it will likely crack down on password sharing by subscribers who have allowed multiple households to access their service from a single account.

The Los Gatos, California-based company estimates that about 100 million households worldwide are fed on the same account, including 30 million in the United States and Canada, its largest market. To stop the practice and motivate more people to pay for their own accounts, Netflix said it could extend a test introduced last month in Chile, Peru and Costa Rica that allows subscribers to add up to two people living outside their home. to their accounts for a period of time. additional fee of USD 2.99.

“Account sharing as a percentage of our paid subscription hasn’t changed much over the years, but along with the first factor, it’s more difficult to increase membership in many markets, a problem that is it was overshadowed by our growth in COVID, “Netflix said. Tuesday in a letter to its shareholders.

Netflix ended March with 221.6 million subscribers worldwide.

With the reduction of the pandemic, people have been finding other things to do and other video streaming services are working hard to attract new viewers with their own award-winning programming. Apple, for example, had the exclusive reproduction rights to “CODA,” which eclipsed Netflix’s “Power of The Dog,” among other films, to win Best Film at the Academy Awards of the Month past.

The escalation of inflation over the last year has also reduced family budgets, which has led to more consumers controlling their spending on discretionary items. Despite this pressure, Netflix recently raised its prices in the U.S., where it has its highest domestic penetration, and where it has had the most trouble finding more subscribers. In the most recent quarter, Netflix lost 640,000 subscribers in the United States and Canada, prompting management to point out that most of its future growth will be in international markets.

Netflix is ​​also trying to give people another reason to subscribe by adding video games at no extra cost, a feature that was first implemented last year.