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SAN FRANCISCO — Netflix suffered its first subscriber loss in more than a decade, causing its shares to plunge 25% in expanded trading amid concerns that the pioneering streaming service may have seen its best days.
According to the quarterly earnings report released on Tuesday, the company’s customer base dwindled by 200,000 subscribers in the January-March period. This year’s decline was partly due to Netflix’s decision to withdraw from Russia to protest the war against Ukraine, resulting in the loss of 700,000 subscribers.
Despite this, Netflix admitted its problems were rooted, predicting it would lose another 2 million subscribers in the April-June period.
If the stock dip continues into Wednesday’s regular trading session, Netflix shares will lose more than half their value so far this year, wiping out $150 billion in shareholders’ fortunes in less than four months.
Netflix also lost 800,000 subscribers in 2011 after announcing plans to start charging separately for the then-nascent streaming service, which was bundled free with its traditional DVD-mail service. The client’s reaction to this move prompted Netflix CEO Reed Hastings to issue an apology for failing to execute the split.
The service also saw a drop in US subscribers in 2019.
But the latest subscriber loss was much worse than Netflix management’s estimate for a conservative gain of 2.5 million subscriptions. The news deepens the growing problems for streaming since the increase in recordings from a captive viewer began to slow during the pandemic.
It marks the fourth time in the past five quarters that Netflix’s subscriber growth has fallen below the previous year’s gains. Now investors fear the streaming service may be embroiled in a growing unease with fierce competition from well-funded rivals like Apple and Walt Disney.
The decline was the weakest annual growth since 2016 after the company added 18.2 million subscribers in 2021. This contrasts with the 36 million subscriber growth over the course of 2020, which Netflix has accomplished quickly and easily, with people staying at home and starving for entertainment. Provides original programming stock.
Netflix previously predicted it would regain its momentum, but is now starting to admit that it’s stuck in a serious ailment that requires action. Among other things, Netflix has signaled that it will likely interfere with the sharing of subscriber passwords that allow multiple households to access its service from a single account.
The Los Gatos, California company estimates that around 100 million households worldwide feed on the same account, including 30 million in its largest market, the United States and Canada. To stop the practice and encourage more people to pay for their own accounts, Netflix said it may expand a test introduced last month in Chile, Peru and Costa Rica that allows subscribers to add up to two people living outside the household to their accounts. Extra pay.
“Account share as a percentage of our paid membership hasn’t changed much over the years, but combined with factor one means it’s more difficult to grow membership in many markets – an issue hidden by our COVID growth,” Netflix said in a letter to shareholders Tuesday.
Netflix closed March with 221.6 million subscribers worldwide.
With the easing of the pandemic, people are finding other things to do, and other video streaming services are working hard to attract new viewers with their own award-winning programming. For example, Apple held exclusive streaming rights to “CODA,” which eclipsed Netflix’s “Power of The Dog,” among other films, to win Best Picture at last month’s Academy Awards.
Rising inflation over the past year has also squeezed household budgets, causing more consumers to rein in their spending on discretionary items. Despite this pressure, Netflix has recently increased its prices in the US, where it has the highest household penetration and has the most difficulty finding more subscribers. In the most recent quarter, Netflix lost 640,000 subscribers in the US and Canada, causing management to point out that most of its future growth will be in international markets.
Netflix is also trying to give people another reason to subscribe by adding video games at no additional cost, a feature that rolled out last year.