It’s the first drop in the scale in a decade and the company expects it will lose another 2 million customers in the second quarter, marking its worst year since it went public.
After a decade of rapid growth that rocked Hollywood to its core, Netflix hit a wall.
The streaming service lost 200,000 customers in the first quarter, the first time it has lost subscribers since 2011. Netflix also expects it will lose another 2 million customers in the current second quarter, its worst year since it went public.
Investors, analysts and Hollywood executives were preparing the company to report a slow start to the year, but they still expected Netflix to add 2.5 million customers. Shares, which have already fallen more than 40% this year, were lower in post-closing trading. At this time they are down approximately 24%.
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Netflix management cited four reasons, including the prevalence of password sharing and increased competition. The company said that there are 100 million families who use its service and do not pay for it, in addition to 221.6 million subscribers. The company is experimenting with ways to record these viewers.
“Our relatively high household penetration, when including the large number of joint accounts in households, combined with competition, creates headwinds for revenue growth,” management wrote in a letter to shareholders.
The results will have repercussions for all major entertainment companies. After seeing millions of customers ditching pay-TV for streaming, American entertainment giants merged and restructured to compete with Netflix in streaming. Investors encouraged this strategic shift, buying shares in companies such as Disney that have demonstrated a commitment to live broadcasting.
late appetizers
Netflix’s problems will leave investors wondering whether the media companies that arrive later will register enough customers to justify all the money they’re spending on new programming.
Co-CEOs Reed Hastings and Ted Sarandos dismissed the company’s recent growth slowdown as a pandemic-related headwind, accelerating its growth in 2020. But subscriber additions have been slowing for a year and a half, and the company hasn’t returned to its pre-pandemic levels.
“Covid’s big push to live has blurred the picture until recently,” the company wrote in its letter.
Netflix has lost customers in three of its four regions, including more than 600,000 in the United States and Canada. He attributed most of this decrease to the rise in prices and said that the decline was expected. The Russian invasion of Ukraine cost the company another 700,000 customers when it was forced to withdraw its services, resulting in a loss of 300,000 customers in Europe, the Middle East and Africa.
bright spot
Asia was the only bright spot. Netflix has added over a million customers in the region, boosted by popular new titles like South Korean drama All of Us Are Dead.
Overall, Netflix expected subscribers to grow by 2.5 million in the first quarter, roughly in line with Wall Street estimates. For the current period, analysts had expected a profit of 2.43 million.
Netflix is still far ahead of most of its competitors outside the US and is the largest streaming service in the world. You believe you can get out of your current situation by attracting new customers with better software and finding more ways to charge your existing user base. Whether Wall Street thinks it’s up for debate.
First-quarter revenue grew 9.8% to $7.87 billion, missing analyst estimates. Earning at $3.53 per share, easily beat expectations of $2.91.
For the current quarter, Netflix expects sales to grow 9.7% to $8.05 billion, with earnings of $3 per share. Both are below Wall Street expectations of $8.23 billion and $3.02 per share.
