Netflix suffered first subscriber loss in more than a decade, causing shares to plunge 25% in

staff Reporter

April 20,2022

Netflix suffered its first subscriber loss in more than a decade, causing its shares to plunge 25% in extended trading amid concerns that the pioneering streaming service may have already seen its best days.

The company’s customer base fell by 200,000 subscribers during the January-March period, according to its quarterly earnings report released Tuesday. It’s the first time that Netflix’s subscribers have fallen since the streaming service became available throughout most of the world outside of China six years ago

The drop this year stemmed in part from Netflix’s decision to withdraw from Russia to protest the war against Ukraine, resulting in a loss of 700,000 subscribers.

Netflix acknowledged its problems are deep rooted by projecting a loss of another 2 million subscribers during the April-June period.

If the stock drop extends into Wednesday’s regular trading session, Netflix shares will have lost more than half of their value so far this year — wiping out about $150 billion in shareholder wealth in less than four months.

The Silicon Valley tech firm reported a net income of $1.6 billion in the recently ended quarter, compared to $1.7 billion in the same period a year earlier. Netflix shares were down some 25 percent to $262 in after-market trades that followed release of the earnings figures.

"We're not growing revenue as fast as we'd like," Netflix said in an earnings letter.

"Covid clouded the picture by significantly increasing our growth in 2020, leading us to believe that most of our slowing growth in 2021 was due to the Covid pull forward."

Netflix believes that factors hampering its growth include the time it is taking for homes to get access to affordable broadband internet service and smart televisions, along with subscribers sharing their accounts with people not living in their homes.

The streaming giant estimated that while it has nearly 222 million households paying for its service, accounts are shared with more than 100 million other households not paying the television streaming service.

"Account sharing as a percentage of our paying membership hasn't changed much over the years, but, coupled with the first factor, means it's harder to grow membership in many markets," Netflix said.

Pulling out of Russia, a step Netflix took following the war in Ukraine, cost it 700,000 subscribers, it said.

Another 600,000 people stopped its service in the US and Canada after the price increase, Netflix said.

Netflix said that move was playing out "in line with expectations" and would yield more money for the firm, despite the cancellations.

The firm's revenue in the first three months of the year was up 9.8% compared with the same period last year to more than $7.8bn (£6bn).

That marked a slowdown from earlier quarters, while profits fell more than 6% to roughly $1.6bn.

Losses in the quarter were partially offset by sign-ups elsewhere such as Japan and India.

As it looks to grow, the firm said it is focused on international markets and finding ways to tap the 100 million people it estimates are sharing household accounts, including more than 30 million in the US and Canada.

“We’re working on how to monetize sharing,” Netflix co-CEO Reed Hastings said in a video regarding this quarter’s earnings. “You know, we’ve been thinking about that for a couple years. But you know, when we were growing fast, it wasn’t the high priority to work on. And now we’re working super hard on it. Remember, these are over 100 million households that already are choosing to view Netflix. They love the service. We’ve just gotta get paid in some degree for them.”