Netflix earnings: Things don’t look upVish Gainon January 21, 2022 at 09:35 Silicon RepublicSilicon Republic
Netflix is experiencing a slow growth in new subscriber additions after the streaming giant gave a weak forecast for the first quarter of 2022 in its latest earnings call.
The Squid Game and Red Notice maker reported a revenue of $7.71bn in its fourth quarter of 2021, meeting Refinitiv expectations in what is usually the busiest time of the year for entertainment. This marks a 16pc increase in revenue over the same period in 2020.
Netflix also added 8.28m new paid subscribers to its platform, missing its own expectation of adding 8.5m subscribers – the same amount it had added in the fourth quarter of 2020. This brings total global paid memberships of the company to nearly 222m.
However, the slow growth in subscriptions and a weak 2.5m forecast for the first quarter this year has missed expectations and underwhelmed shareholders. CNBC reported that Netflix shares dropped 20pc after its earnings report was published yesterday (20 January).
The 2.5m forecast for new subscribers early this year is a result of “a more back-end weighted content slate” with big potential hits such as season 2 of Bridgerton – one of the most watched Netflix shows – and the original film The Adam Project due to release in March.
Growth in subscribers has not taken off since the pandemic started in 2020, according to Netflix, because of “the ongoing Covid overhang and macroeconomic hardship” in many parts of the world such as the LATAM region. Competition from other streaming giants, such as Disney Plus, has also played a role.
Subscriber growth has been stagnating particularly in Netflix’s biggest market, the US and Canada, as the company looks to Asia to drive new subscribers. The APAC region has seen strong subscriber growth, especially in Japan and India, with 2.6m additions.
However, the strong dollar is costing Netflix in Asian markets, where revenue per membership is lower than the US and Europe regions. “The thing that frustrates us is why we haven’t been more successful in India,” said Reed Hastings, chief executive of Netflix, on the earnings call.
In October, Netflix said that because of the popularity of shows such as Squid Game, Money Heist, Lupin and The Crown, it will focus on more international content to increase its subscriber base. It has already started wooing new users in Africa with a free plan in Kenya.
Netflix is also making a play for the gaming industry in its search for more subscribers and appealing to a wider audience. “In 2022, we’ll expand our portfolio of games across both casual and core gaming genres as we continue to program a breadth of game types to learn what our members enjoy most,” the company wrote in a letter to shareholders.
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