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Netflix shares shed more than a third of their value on Wednesday, a day after the streaming service reported its first quarterly loss of subscribers in a decade, a sign its foothold in the streaming wars could be crumbling.
The company lost a net 200,000 subscribers in the first three months of the year, despite adding 500,000 worldwide. It lost 700,000 subscribers in Russia after pulling out of the country over the invasion of Ukraine. However, that loss comes with a broader decline in viewership as pandemic restrictions ease and consumers increasingly find other entertainment options, and the company expects to lose an additional 2 million subscribers in the current quarter.
“Our revenue growth has slowed significantly,” Netflix admitted on the first line of its letter to shareholders. The massive surge in streaming caused by Covid ‘obscured the picture until recently’.
The reaction on Wall Street was clear, with shares plummeting 36.7 percent to trade around $220 at midday. But the stock was already sharply down before Wednesday’s plunge, after falling 40 percent for the year.
David Trainer, chief executive of investment research firm New Constructs, believes Netflix could drop as low as $150 this year. He advises investors to limit their losses.
“Netflix was a pioneer in this space, but the party’s over,” Trainer said in comments he emailed to The Post on Wednesday.
While streaming competitors like Disney and Paramount can monetize their content in other ways, e.g. B. about theme parks and merchandise revenue, Netflix lacks these options. And it can “no longer rely on subscribers as its sole source of monetization,” Trainer said, “a metric Wall Street was once obsessed with.”
Netflix still expects its revenue to grow to nearly $8 billion in the current quarter, up 10 percent from the same period last year. The company also has a paying audience of over 220 million, more than double what it was five years ago.
But the unexpected drop in paid viewers — the company announced in January that that group would increase by 2.5 million — reflects a steady slowdown in business. The company cited increased competition and a slowdown in the pandemic-driven growth in paying viewers, pushing more people to at-home entertainment options.
“Netflix felt vulnerable yesterday in a way it has never felt before,” analysts at LightShed Partners said in comments emailed to The Post on Wednesday.
Despite its many acclaims, the company hasn’t really addressed how its content, particularly English language content, “just doesn’t resonate” relative to the money Netflix is spending on it, according to comments from Richard Greenfield, Brandon Ross and Mark Kelley of LightShed. The company spends $17 billion each year, more than any other player in the streaming wars.
“The need for ‘better’ content has become much more important as competition has increased significantly over the past two years. Having a lot of content that is “good enough” is no longer enough,” the analysts said.
To counter the slump, Netflix said it will seek to monetize the millions of non-paying viewers who have benefited from account sharing. The company estimates that 100 million households, including more than 30 million in the United States and Canada, share accounts.
“[Account sharing]is nothing new,” Netflix co-CEO Reed Hastings told investors via video. “We’re working on how we can monetize sharing,” he said. “Remember, that’s 100 million households who already choose to watch Netflix. They love the service. We just need to be paid.”
The company is experimenting with two paid sharing features in Chile, Costa Rica, and Peru that aim to persuade existing account sharers to start paying small sums of up to $3.
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Hastings also acknowledged a strong field of streaming competitors. “We have great competition. They have some very good shows and films,” he said, without naming rivals or films. “What we need to do is take it up a notch.” In its letter, Netflix listed Disney Plus as one of the “traditional entertainment companies” to recognize that “streaming is the future.”
Over the long term, Netflix said growth will come primarily from outside the United States. It will focus on producing content that “can be made anywhere and loved anywhere,” Netflix said, citing non-English-language hits produced outside the United States such as South Korea’s “Squid Game” and “All of Us Are.” dead”. Spain’s “money heist”.
The company reported net income of $1.6 billion for the January-March period, compared to $607 million in the previous quarter, but down about 6 percent from the prior-year first quarter. Revenue was nearly $7.9 billion, up 10 percent from the same period last year.
Other streaming companies also recorded price losses on Wednesday. Warner Bros.-Discovery shares fell 6 percent, while Walt Disney shares fell 4.2 percent. Paramount’s stock fell just 0.4 percent.