For the first time in a decade, Netflix loses subscribers... 2,00,000 in less than 100 days

As it looks to grow, the firm said it is focused on international markets and finding ways to tap the 100 million people it estimates are sharing household accounts, including more than 30 million in the US and Canada

FPJ Web DeskUpdated: Wednesday, April 20, 2022, 08:19 AM IST
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Netflix suffered its first subscriber loss in more than a decade, causing its shares to plunge 25% in extended trading amid concerns that the pioneering streaming service may have already seen its best days.

The company’s customer base fell by 200,000 subscribers during the January-March period, according to its quarterly earnings report released Tuesday. It’s the first time that Netflix’s subscribers have fallen since the streaming service became available throughout most of the world outside of China six years ago.

The drop this year stemmed in part from Netflix’s decision to withdraw from Russia to protest the war against Ukraine, resulting in a loss of 700,000 subscribers.

Netflix acknowledged its problems are deep rooted by projecting a loss of another 2 million subscribers during the April-June period.

If the stock drop extends into Wednesday’s regular trading session, Netflix shares will have lost more than half of their value so far this year — wiping out about $150 billion in shareholder wealth in less than four months.

The Silicon Valley tech firm reported a net income of $1.6 billion in the recently ended quarter, compared to $1.7 billion in the same period a year earlier. Netflix shares were down some 25 percent to $262 in after-market trades that followed release of the earnings figures.

"We're not growing revenue as fast as we'd like," Netflix said in an earnings letter.

"Covid clouded the picture by significantly increasing our growth in 2020, leading us to believe that most of our slowing growth in 2021 was due to the Covid pull forward."

Netflix believes that factors hampering its growth include the time it is taking for homes to get access to affordable broadband internet service and smart televisions, along with subscribers sharing their accounts with people not living in their homes.

The streaming giant estimated that while it has nearly 222 million households paying for its service, accounts are shared with more than 100 million other households not paying the television streaming service.

"Account sharing as a percentage of our paying membership hasn't changed much over the years, but, coupled with the first factor, means it's harder to grow membership in many markets," Netflix said.

Pulling out of Russia, a step Netflix took following the war in Ukraine, cost it 700,000 subscribers, it said.

Another 600,000 people stopped its service in the US and Canada after the price increase, Netflix said.

Netflix said that move was playing out "in line with expectations" and would yield more money for the firm, despite the cancellations.

The firm's revenue in the first three months of the year was up 9.8% compared with the same period last year to more than $7.8bn (£6bn).

That marked a slowdown from earlier quarters, while profits fell more than 6% to roughly $1.6bn.

Losses in the quarter were partially offset by sign-ups elsewhere such as Japan and India.

As it looks to grow, the firm said it is focused on international markets and finding ways to tap the 100 million people it estimates are sharing household accounts, including more than 30 million in the US and Canada.

“We’re working on how to monetize sharing,” Netflix co-CEO Reed Hastings said in a video regarding this quarter’s earnings. “You know, we’ve been thinking about that for a couple years. But you know, when we were growing fast, it wasn’t the high priority to work on. And now we’re working super hard on it. Remember, these are over 100 million households that already are choosing to view Netflix. They love the service. We’ve just gotta get paid in some degree for them.”

Netflix chief operating officer and chief product officer Greg Peters elaborated further on the company’s thinking in Tuesday’s video. “If you’ve got a sister that’s living in a different city, you want to share Netflix with her, that’s great,” he said.

“We’re not trying to shut down that sharing. But we’re going to ask you to pay a bit more to be able to share with her so she gets the benefit and the value of the service but we also get the value of the revenue associated with that viewing.”

Right now, the company is testing a new feature in Chile, Costa Rica, and Peru where subscribers can add “sub accounts” for up to two people outside of their home at reduced prices. But it may not launch more broadly for some time, according to Peters.

“Just to set your expectations, my belief is that we’re going to go through a year or so of iterating and then deploying all of that so that we that solution globally launched, including [in] markets like the United States,” he said.

Netflix ended March with 221.6 million worldwide subscribers. The subscriber downturn clipped 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 climbed 10% from last year to nearly $7.9 billion.

With the pandemic easing, people have been finding other things to do, and other video streaming services are working hard to lure new viewers with their own award-winning programming. Apple, for instance, held the exclusive streaming rights to “CODA,” which eclipsed Netflix’s “Power of The Dog,” among other movies, to win Best Picture at last month’s Academy Awards.

Escalating inflation over the past year has also squeezed household budgets, leading more consumers to rein in their spending on discretionary items. Despite that pressure, Netflix recently raised its prices in the U.S., where it has its greatest household penetration — and where it’s had the most trouble finding more subscribers.

In the most recent quarter, Netflix lost 640,000 subscribers in the U.S. and Canada, prompting management to point out that most of its future growth will come in international markets.

Netflix also is trying to give people another reason to subscribe by adding video games at no extra charge — a feature that began to roll out last year.

(with inputs from AP)

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