Netflix stock is down more than 20% after losing 200,000 customers
Netflix stock is down more than 20%
After losing 200,000 customers in the first quarter
Netflix stock is down
Today’s Netflix announcement is concerning. The streaming service announced a 200,000-subscriber loss in the first quarter of 2022, the first in more than a decade. Netflix expects a 2 million global paid subscriber loss in the second quarter, indicating that the company’s losses will continue.
This loss is lower than expected by the corporation. The business informed shareholders that it planned to attract 2.5 million net customers in the first quarter, down from 4 million a year earlier. Analysts predicted that 2.7 million people would sign up.
How much decrease in subscribers?
Netflix stock now has 221.6 million subscribers, down from 221.8 million the previous quarter. According to the company, its service is used by more than 100 million additional households, with more than 30 million of those in the United States and Canada.
Reasons for this drop
A variety of reasons, according to the corporation, contributed to the drop in membership numbers. In Russia, for example, the suspension of its service resulted in a 700,000 subscriber loss. Netflix stock claims that if it hadn’t been for it, the quarter would have seen 500,000 net subscriber increases. Netflix reported a decrease in its operations in Central and Eastern Europe in March, which corresponded with the commencement of Russia’s invasion of Ukraine.
In its shareholder letter, Netflix listed a number of other issues that contributed to the loss. To explain why it was having such a hard time acquiring new users, the streamer mentioned everything from password sharing to the competitive environment to Covid and even inflation. Netflix recently began testing a feature that would prompt subscribers to pay an additional fee if they shared their service with people outside their own household, in order to address the password sharing issues.
Netflix statement
The business says that although this new function is now being tested in Costa Rica, Peru, and Chile, it will be expanded in the future. In a shareholder letter, Netflix stated:
“When it comes to shared houses, there’s a wide spectrum of participation, from frequent to infrequent watching.” While we won’t be able to commercialize everything right once, we feel it’s a significant short- to mid-term possibility.”
Netflix said in January that it planned to gain fewer customers in the first quarter than in recent years since the majority of its high-profile programming, such as the second season of “Bridgerton” and “The Adam Project,” will be published towards the end of the quarter. However, this does not entirely explain the effect since, in addition to these high-profile initiatives, Netflix aired numerous other popular series throughout the quarter.
Netflix may have admitted, to some level, that its approach to a lot of formulaic and light reality programming does not always work. In a shareholder letter, Netflix said it will work to improve “all aspects of Netflix – in particular, the quality of our programming and recommendations” to help re-accelerate user viewing and revenue growth. (This is the closest we’ll come to Netflix admitting that the quality of its content has deteriorated.)
Competitors
Netflix has always fought with linear TV, Amazon, YouTube, and Hulu in terms of the competitive environment, but claims that things have altered in the last three years due to new arrivals. This has a particular impact on U.S. growth, according to the company’s shareholder letter:
“…Traditional entertainment corporations have recognized that streaming is the way of the future, and a slew of new streaming services have started as a result.” According to Nielsen, our U.S. television viewing share has been stable to increasing, but we want to grow it faster.” Although retention was somewhat lower than expected, the corporation asserted that it was still robust and better than its competitors.
Prediction of analysts
Analysts had predicted $7.93 billion in revenue for the quarter, but revenue came in at $7.78 billion. However, EPS was $3.53, compared to $2.89 projected. On the announcement of the subscriber reductions, the company’s shares are falling in after-hours trade. In after-hours trading, shares fell by 23%, wiping out $30 billion in market capitalization. In the last two years, Netflix’s market share has decreased dramatically. According to Parrot Analytics, it fell from 55.7 percent to 45.2 percent globally between Q1 2020 and Q1 2022, and from 52.4 percent to 42.4 percent in the US.
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