Netflix shares drop 25pc after losing subscribers for first time in a decadeLeigh Mc Gowranon April 20, 2022 at 07:08 Silicon RepublicSilicon Republic

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Netflix has reported a loss of around 200,000 subscribers in the first quarter of the year, the first time the streaming giant has lost subscribers in more than a decade.

In a letter to shareholders announcing its earnings, Netflix said the suspension of its service in Russia and “winding-down of all paid Russian memberships” is the cause of this unexpected decline. The company said that without this factor, paid net additions would have been 500,000.

However, the streaming company had previously predicted an addition of 2.5m subscribers for this quarter, which had underwhelmed shareholders at the time.

Netflix recorded revenue of around $7.87bn for the first quarter of the year, which is a year-on-year increase of 9.8pc. Netflix said its revenue growth has “slowed considerably”, as its growth in the previous quarter was 16pc.

The slow revenue growth, combined with the unexpected loss in subscribers has underwhelmed shareholders and fallen short of expectations. CNBC reported that Netflix shares dropped 25pc after its earnings report was published yesterday (19 April).

The company said factors that contributed to the result include growing competition as “traditional entertainment companies” enter the streaming market, poor economic growth, inflation and continued disruption from the Covid-19 pandemic.

Netflix also estimates that from its 222m paying households, its service is being shared to roughly another 100m homes. The streaming giant said this means “its harder to grow membership in many markets”.

Netflix said it will focus on how to “monetise sharing” as a potential short to mid-term opportunity. Netflix co-CEO Reed Hastings said in an earnings call that the company is now “open” to add lower-priced subscription tiers with ads, despite the company resisting adverts for years, CNBC reported.

The streaming giant added that much of its growth in the longer term will come from outside the US.

The company has recently been looking to Asia to drive new subscribers. The APAC region saw strong subscriber growth last year, especially in Japan and India, with 2.6m additions in the fourth quarter of 2021. Paid net additions in the region this quarter was around 1.1m.

Netflix said it plans to improve the quality of its programming and recommendations “which is what our members value most”. Recently released programmes such as Inventing Anna and season 2 of Bridgerton saw high view numbers.

Last month, Netflix announced a price hike for subscribers in Ireland, with an increase in all subscription options including a €3 rise for the premium package.

At the time, a spokesperson for Netflix told media outlets that the updated prices “reflect the investment we have made in our service and catalogue” and will allow the company to continue making films and TV shows such as The Crown and Vikings: Valhalla.

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