Netflix shares fall 25% as it loses subscribers

0

Shares of Netflix lost a quarter of their value on Tuesday after the company revealed its subscriber ranks shrank in the first quarter of this year.

It was the first time in a decade that the main streaming television service had lost subscribers. The company blamed the quarter-over-quarter erosion on the suspension of its service to Russia due to Moscow’s invasion of Ukraine.

Netflix ended the first quarter of this year with 221.6 million subscribers, slightly less than the last quarter of last year.

The Silicon Valley technology company reported net income of $1.6 billion in the latest quarter, up from $1.7 billion in the same period a year earlier. Shares of Netflix fell more than 25% to $259.30 in aftermarket trading following the release of earnings figures.

Netflix believes factors hindering its growth include subscribers sharing their accounts with people who don’t live in their home.

Read more: Netflix raises monthly subscription prices

The streaming giant estimated that while nearly 222 million households pay for its service, accounts are shared with more than 100 million other households paying no subscription fees.

“When we were growing fast it wasn’t a priority, and now we’re working really hard on it,” chief executive Reed Hastings said of account sharing during an earnings call.

“More than one hundred million households already choose to watch Netflix; they like the service, we just have to be paid to some extent for them.

Netflix is ​​testing ways to make money with people sharing accounts, such as adding a feature that lets subscribers pay a little more to add other households.

“If you have a sister, let’s say she lives in another city and you want to share Netflix with her, that’s great,” chief product officer Greg Peters said on the earnings call.

“We are not trying to stop this sharing, but we will ask you to pay a little more to be able to share with her.”

Another factor holding back Netflix’s growth is intense competition from titans such as Apple and Disney.

Compression of inflation

Netflix and its streaming TV rivals are also facing a rate of inflation that is likely causing people to take stock of how many entertainment subscriptions they’ve racked up, according to analyst Rob Enderle of Enderle Group. .

“With inflation setting in, people are starting to watch their pennies,” Enderle said. “You get a situation where people are thinking about the subscriptions they have and the subscriptions they keep.”

A big market player like Netflix will find it difficult to grow in this type of economic environment, especially in a market like the United States where it is deeply penetrated, Enderle told AFP.

Read more: Netflix like police action captured on CCTV

Netflix recently announced subscription price hikes in the US, with the basic option now costing $9.99 and the more expensive up to $19.99.

Netflix is ​​considering possibly adding an ad-supported low-cost subscription tier, a model Hastings had long snubbed.

“It’s pretty clear that this works for Hulu,” Hastings said.

“If you still want the ad-free option, you can have that. If you’d rather pay a lower price and are ad-tolerant, we’ll accommodate that too.”

Weaving ads into Netflix to generate revenue is “inevitable” given recent earnings numbers, said Upholdings portfolio manager Robert Cantwell.

The race for streaming TV is heating up, with Disney showing earlier this year that it is closing the gap with market leader Netflix, whose progress has slowed.

Read more: Cristiano Ronaldo will tell his love story with his girlfriend in the Netflix documentary

Like Amazon’s Prime video streaming service, Disney is copying Netflix’s tactic of investing in local content that appeals to the language, culture and tastes of respective international markets.

Netflix has made this approach work, backing original blockbusters like South Korea’s “Squid Game” and France’s “Lupin.”

AFP with an additional contribution from GVS News Desk

Share.

Comments are closed.