Netflix Slumps In Q1 On 200,000 Subscribers’ Drop

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The streaming giant, Netflix, on Tuesday reported a dip in revenue on the unexpected drop of 200,000 subscribers for the first time in more than a decade.

The company lost 200,000 subscribers in the first quarter of 2022, against its expectations to add 2.5 million net subscribers. Analysts had expected about 2.8 million net adds. Netflix last reported a subscriber loss in 2011.

The loss in subscribers owe to the implementation of price hikes in developed markets including the U.S. and Canada, while the loss of Russian subscribers as – the company suspended its services in the country – also weighed.

Netflix announced mixed first-quarter results in which earnings per share stood at $3.53 on revenue of $7.87 billion. Analysts according to Investing.com had anticipated EPS of $2.95 on revenue of $7.9 billion.

Netflix shares lost more than 25 per cent in after-hours trading following the report.

“The suspension of our service in Russia and winding-down of all Russian paid memberships resulted in a -0.7m impact on paid net adds; excluding this impact, paid net additions totalled +0.5m,” Netflix said. “The main challenge for membership growth is continued soft acquisition across all regions.”

Looking ahead, there isn’t any sign of a rebound in subscriber growth as Netflix forecasts second-quarter net paid subscribers to decline by 2.0 million compared with 1.5 million net adds in the year-ago quarter.

Netflix enjoyed a surge in subscriber growth during the pandemic but saw growth slow in 2021 due to what it believed was pull forward Covid demand. But the dismal numbers to kick off 2022 have forced the company to reassess the factors weighing on revenue growth. The streaming giant blamed four factors including subscribers sharing passwords and a jump in competition from newly launched streaming services.

[W]e estimate that Netflix is being shared with over 100m additional households, including over 30m in the UCAN region. 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 – an issue that was obscured by our COVID growth,” Netflix said.

Some have also flagged the company’s “content dumps” as a reason for subscriber churn.

“Content dumps, where all episodes of a new season are delivered at the same instant, will likely keep churn high, as price-conscious consumers can swap out of Netflix and shift to a competitor service after viewing the content they desire,” the analyst said in a note ahead of the Netflix’s quarterly report.

Netflix has, however, charted a course beyond its core domestic markets in search of subscriber growth.

“Subscriber growth will likely occur primarily in less developed regions at lower subscription prices, with Western subscribers paying higher rates to fund new content,” Wedbush added.

But the latest figures show that Netflix still has work to do as Q1 paid net additions dropped in the EMEA, LATAM, and APAC regions compared with a year ago.

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