Netflix lost nearly 1 million subscribers during the spring amid tougher competition and rising inflation that is squeezing family budgets, increasing the urgency of the video streaming service’s effort to launch a cheaper option with interruptions commercial.
The April-June contraction of 970,000 accounts, announced Tuesday as part of Netflix’s second-quarter earnings report, is by far the largest quarterly loss of subscribers in the company’s 25-year history. Still, it could have been much worse, given that Netflix management released an April forecast calling for a loss of 2 million subscribers during the second quarter.
The less severe loss of subscribers, combined with a prospect calling for a return to growth during the July-September period, helped Netflix’s battered shares rise 7% in extended trading after the numbers were released.
Not impressed
“The market seems to be in a mood like‘ everything is better than feared! ’, Which will help the NFLX, but it’s hard to look at the report / guide and be very impressed (so no we would chase him out of hours), ”Adam Crisafulli of Vital Knowledge said in a research note.
Netflix’s April-June decline follows a loss of 200,000 subscribers in the first three months of the year, the first time Netflix’s total subscribers have shrunk in consecutive quarters since the transition began. offer DVD rental by mail to video streaming 15 years ago. .
The loss of nearly 1.2 million subscribers during the first half of this year also offers a contrasting start to the pandemic-driven growth that Netflix enjoyed during the first half of 2020, when its streaming service picked up nearly 26 million subscribers.
Despite the fall, Netflix still earned $ 1.4 billion, or $ 3.20 per share during the quarter, up 6% from the same period last year. Revenue rose 9% from the same time last year to nearly $ 8 billion.
Expected rebound
Netflix ended June with 220.7 million subscribers worldwide. much more than any of its new competitors like Walt Disney Co. and Apple. And in a hopeful sign, Netflix management predicted that its service will add about a million subscribers during the July-September period, indicating that the worst of its downfall could have happened.
While Netflix’s spring subscriber losses weren’t as bad as investors and management feared, the recession served as an unpleasant reminder of the challenges the Los Gatos, California-based company now faces. of a decade of unbridled growth.
Netflix’s share price has fallen nearly 70% so far this year, removing about $ 180 billion in shareholder wealth. Since then, other video streaming services have made great strides in attracting viewers, with Apple earning praise for its award-winning programming of TV series and movies, while the popular line of family titles of Disney continues to gain strength.
At the same time, Netflix has raised its prices to help pay for its own original programming, just as higher inflation rates in 40 years have led consumers to curb spending on discretionary items such as entertainment. .
These factors help explain Netflix’s April announcement that it will crack down on the unbridled exchange of subscriber passwords and take another step it previously despised by offering a less expensive level of its service that will include business outages. Without providing further details, Netflix said Tuesday that both the ad-supported plan and the crackdown on password sharing will begin early next year. The company did not say how much the streaming option will cost with commercials.
Netflix took it one step further by creating the ad support option last week when it announced it would partner with Microsoft to deliver the ads.
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