Business

Netflix drops subscribers for the first time in a decade

Netflix said its decade-long subscriber growth ended in the first quarter and acknowledged that it was becoming “harder to grow members” in many markets, sending shares their 25% off in after-hours trading.

Video streaming The pioneer shocked investors by forecasting that its subscriber count would drop another 2 million in the current quarter, to about 219.6 million, after falling by about 200,000 in the first quarter. Investors are expected to add 2.6 million subscribers.

Netflix The blame for the significant slowdown was in part on signs of saturation in its key markets. But it also acknowledged the impact of increased competition from streaming services launched by traditional media conglomerates like Disney, Warner Bros Discovery and Paramount. Together, these factors are creating a “revenue growth headwind,” the company said.

“We definitely feel higher levels of [market] infiltrate . . . and increased competition,” said Ted Sarandos, co-CEO.

The report from Netflix marks a significant change in assets for a company that has shown dizzying growth over the past 10 years and exploded during the depths of the Covid-19 pandemic. When it showed signs of slowing late last year, company officials blamed “noise” on the lingering effects of Covid-19.

“This is a change of tune,” said Jefferies analyst Andrew Uerkwitz, who noted that Netflix has rarely even acknowledged that it has faced competition in the past. “Looks like they’re in rebuild mode.”

Netflix said it would try to spike growth by improving “the quality of our programming” and by finding a way to charge some 100 million households to share other users’ accounts.

Reed Hastings, co-CEO, said account sharing, which has always been an issue at Netflix, is now in focus. “When we were growing fast, it wasn’t a high priority, but now we are working extremely hard,” Hastings said. The company is testing how it charges for shared accounts in markets like Chile and Peru.

Hastings also said Netflix plans to launch an ad-supported streaming service – an idea he has long resisted. “It’s something that we’re looking at now and will be out in the next year or two,” he said. “It’s working for Hulu, and Disney is working on it. Those companies figured that out.”

The report is likely to raise investor concerns about the cost of the streaming wars – and the potential scale of profits at stake. Uerkwitz estimates Netflix will spend $19.2 billion on content this year as it competes with Amazon, Apple, Disney and others that are investing heavily in streaming.

Spencer Neumann, Netflix’s chief financial officer, said the company will “roll back some of our spending growth across both content and non-content” over the next 18 to 24 months because of slower revenue growth. . “But we’ll still be actively investing in that long-term opportunity.”

Netflix raised prices in the US and Canada, costing about 600,000 subscribers but nevertheless “remarkably positive revenue,” the company said. It also stopped streaming in Russia after the invasion of Ukraine, costing around 700,000 subscribers.

It’s the second time Netflix has surprised investors this year, after rocking the market in January with a forecast that subscriber growth would slow significantly in 2022. The company is down about 40% this year.

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