Netflix Loses 200,000 Subscribers, Shares Plummet 25%

Netflix Suffers a Severe Blow

Netflix, the American global streaming-on-demand media provider and production company, reported its first subscriber loss in more than ten years. Launched in 1997, the streaming leader had 221.8 million subscribers worldwide by the end of 2021, with the bulk of users based in the United States and Canada, as well as Europe, the Middle East, and Africa (EMEA). Nevertheless, on Tuesday, Netflix reported that it suffered a severe setback during the January-March period of 2022, with 200,000 users unsubscribing their accounts, bringing the new total to 221.6 million paid subscribers. It’s the first time that the company’s member base fell since becoming available throughout most of the world in 2016; Netflix’s last loss of subscribers occurred back in 2011.

The drop can be attributed to several reasons, such as Netflix’s decision to withdraw its streaming services from Russia in protest of the country’s military invasion of Ukraine, the going back to normality after two years of pandemic-driven quarantines, the growing competition from rival streaming services like Amazon Prime and Apple TV+, and the use of shared passwords.

The streaming giant estimates that, globally, more than 100 million households access its streaming services without paying for an account, through password sharing. “Our revenue growth has slowed considerably,” Netflix wrote in a company to shareholders, adding: “Streaming is winning over linear, as we predicted, and Netflix titles are very popular globally. However, our relatively high household penetration – when including the large number of households sharing accounts – combined with competition, is creating revenue growth headwinds.

Netflix Shares Plummet

Following Netflix’s quarterly earnings report signifying their fall in subscriber numbers, the company’s shares plummeted by over 25% to $258 in after-hours trading on Wall Street last night. Likewise, fellow streaming stocks like Spotify, Warner Bros. Discovery, and Disney also took a hit in the after-hours market after Netflix’s latest updates.

If the stock tumbles further during Wednesday’s regular trading session, this will result in Netflix shares losing more than half of their value this year, wiping out approximately $150 billion in shareholder wealth. Investors had already been bailing out of the company’s once high-flying stock amid a dramatic slowdown in subscriber growth.

What to Expect Next

While the Covid-19 lockdowns drove millions of hungry-for-entertainment customers into binge-watching shows as a diversion from being corralled at home, the pandemic isolation measures are now slowly easing off, meaning that people have started returning to their out-of-home, social activities. Netflix has, thus, shared concerns that this quarter’s subscriber loss was just the appetizer, forecasting an even bigger loss for a second straight quarter. Specifically, the streaming giant estimates a loss of 2 more million subscribers for the April-June period.   

Market-wise, it remains to be seen whether the Netflix stock price will recover. Its stock price was already on a bumpy road, as investors were already wary of how successful companies that performed considerably well during lockdowns will remain, or if they will see a sharp drop in their growth. Furthermore, even though Netflix’s revenue came in at $7.87 billion, an increase of 10% compared to the first quarter of 2021, it was still lower than the analysts’ expectations of $7.93 billion. Likewise, net income during the January-March period was $1.6 billion, 6.4% down from last year’s $1.7 billion.

The company explores putting forth specific measures that will help them expand their revenue, such as focusing more on original programming, adding a feature that would let subscribers extend their account to other households for an additional fee, as well as offering lower-priced, ad-supported tiers.  

Disclaimer: This article is not investment advice or an investment recommendation and should not be considered as such. The information above is not an invitation to trade and it does not guarantee or predict future performance. The investor is solely responsible for the risk of their decisions. The analysis and commentary presented do not include any consideration of your personal investment objectives, financial circumstances or needs.

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