Netflix Chairman and CEO Reid Hastings had a few words worthy of a script for this week’s news about Netflix’s declining popularity and prospects.
“Well, that’s ab *** x,” Hastings told a town hall Wednesday with officials, according to the Wall Street Journal.
His comments came a day after the streaming giant posted its first drop in a quarter in more than a decade, and on the same day investor Bill Ackman withdrew $ 1.1 billion in funding, a $ 50 billion overnight loss for Netflix.
To curb their bleeding finances, insiders at Netflix told the Wall Street Journal that the company would start allocating production budgets based on viewership – shows that attract more viewers are shows that make more money.
“We need to determine the right amount of budgets based on what creativity dictates and what the size of the audience is,” Netflix global television chief Bela Bajaria told the Wall Street Journal.
On Wednesday, billionaire investor Bill Ackman liquidated the $ 1.1 billion stake he had in the wake of the Netflix crisis, despite losing $ 400 million.
The manager of the hedge fund gave up 3.1 million shares, which he bought only three months ago, as the turmoil in the streaming giant continued to grow.
He announced yesterday that New York-based Pershing Square Capital Management is parting ways with the investment due to the company’s “unpredictable” future.
Billionaire investor Bill Ackman (pictured) has liquidated a $ 1.1 billion stake in the crisis-hit Netflix – despite losing $ 400 million
This chart shows how Netflix is taking advantage of the Covid boom. Between January and March 2020, the business continued as it did in 2019 and 2018, before the number of new accounts increased from mid-March to May, as much of the world went into blockade.
Ackman told CNN’s Scott Wapner on Thursday morning that “I’m 100 percent ready to admit when I’m wrong, and 100 percent ready to admit when I’m wrong, fast.”
“It’s a great company run by a great management team at a time when there’s a certain amount of uncertainty that doesn’t make it appropriate in Pershing Square’s portfolio.”
Netflix lost $ 50 billion overnight as its shares fell off a rock amid a mass exodus of subscribers.
The streaming giant suffered huge losses after its shares failed to recover yesterday from a record drop of 35%.
Pre-market trading this morning showed that the company’s shares remained low at $ 226 – spiraling down from $ 348 on Tuesday afternoon.
Meanwhile, its rivals appear to have united as they released figures showing millions more subscribers over the past few months.
HBO Max and HBO customers jumped three million in the last quarter to 76.8 million, an increase of 12.8 million year on year.
Akman seemed to be the first big name to jump on the ship, as his company liquidated the $ 1.1 billion stake it had for Netflix.
Pershing Square Capital Management sold 3.1 million shares it had bought just three months after Netflix’s shares fell.
In January, it spent more than $ 1 billion on streaming services just days after a disappointing subscription forecast lowered its share price.
Now a second bout of negative news for subscribers – the company said it lost 200,000 – has prompted the fund manager to turn his back on the company.
Pictured: Netflix subscribers over the past few months are pictured along with the projected first quarter of 2022.
Netflix is paying for subscriber growth, showing a sharp decline from 2020 to the first two quarters of 2021.
How Netflix became a pandemic favorite with its original content before losing 200,000 subscribers and investor confidence
1997 – Mark Randolph and Reed Hastings launch Netflix after discussing ways to emulate Amazon’s online sales model
1999 – Randolph and Hastings refuse to sell Netflix to Jeff Bezos after receiving an offer of approximately $ 15 million
2000 – Hastings and Randolph offer to sell Netflix to Blockbuster for $ 50 million. Blockbuster CEO John Antioko declined, saying “the dotcom hysteria is completely exaggerated
2002 – Netflix goes public, selling 5.5 million shares at $ 15 per share
2005 – Earning more than $ 500 million in revenue, Netflix delivers 1 million DVDs a day from its selection of more than 35,000 movies
2007 – Netflix launches its streaming website, the same year it delivers its billion-dollar DVD
2008 – All Netflix customers with a DVD rental subscription get full access to the online streaming service for free
2009 – Netflix website streams outperform all DVD shipments
2010 – Netflix makes $ 1 billion deal to stream Paramount Lionsgate and Metro-Goldwyn-Mayer
2011 – That same year, Netflix became the largest source of Internet streaming in North America, splitting its existing subscription model by offering separate DVD rental and streaming plans.
2012 – Netflix launches in selected countries in Europe and signs a streaming agreement with Disney and The Weinstein Company
2013 – Netflix begins producing and releasing original series
2014 – Subscription fees increase from $ 7.99 to $ 9.99
2017 – After four years of producing original content, Netflix announces plans to make half of its library consist of original content by 2019, investing $ 8 billion in the project
March 2020 – New accounts increase in May as much of the world crashes due to the Covid pandemic
March 2022 – After the invasion of Ukraine, Netflix announces that it will suspend all streaming services in Russia at a cost of 700,000 subscribers
April 2022 – Netflix announces loss of 200,000 subscribers in its first quarter. Hours later, investor Bill Ackman withdrew $ 1.1 billion in funding, costing Netflix $ 50 billion overnight
Ackman said the proposed changes to the business model, including advertising and harassment of defaulters, make sense, but would be unpredictable.
He said: “While Netflix’s business is fundamentally easy to understand, in light of recent events, we have lost confidence in our ability to predict the company’s future prospects with sufficient certainty.”
Pershing Square, which now invests $ 21.5 billion, is buying shares in only about a dozen companies at once and needs a “high degree of predictability,” Ackman said.
Instead of waiting for Netflix to improve, Ackman suffered losses estimated at more than $ 400 million, people familiar with the portfolio said.
Netflix loses billions of dollars a year because of illegal “markets” for sharing passwords that offer access for only $ 1, experts say. The popular streaming app misses up to $ 6.25 billion a year as customers use the services to avoid a $ 19.99 per month premium account fee.
Why is Netflix losing viewers and what will it do now?
What are the problems with Netflix?
The main problem for Netflix is simply that it lost viewers earlier in the year, while its biggest rivals won.
Netflix revealed on Tuesday that it lost 200,000 users in the first three months of 2022, well below the forecast that it will add 2.5 million subscribers.
In the UK, the pressure on streaming companies has become apparent as customers seek to reduce their subscriptions as they witness growing energy and commodity bills during the cost of living crisis. Experts from Kantar said earlier this week that about 1.5 million subscriptions have been canceled in the UK since early 2022.
Netflix said the challenging economic background, the war in Ukraine, the slowdown in broadband in some countries and the large number of subscribers sharing their account data with non-paying households have contributed to the decline. The company’s withdrawal from Russia after the invasion of Ukraine meant that it immediately lost its 700,000 customers in the region, but the company would still see figures well below expectations without intervention.
As customer costs are under pressure, the group is facing increased demand for high-quality content to justify people’s subscription fees. The main challenge for the company in recent years has been to provide a strong list of original series and movies, as many previous partners, such as Disney, have downloaded their content to launch their own platforms.
How bad can the eviction of subscribers be?
The main reason why shares fell so sharply on Tuesday was that bosses warned shareholders that the situation would worsen before it improved. Netflix estimates that another two million users will leave in the three months to July.
The company said its profits had fallen 6% in the last quarter and bad forecasts could suggest an even sharper drop in profits. Paul Alison of Freetrade said that the projected decline in consumers was “a worrying sign … at a time when the company is raising prices everywhere to generate enough cash flow (which is currently negative) to maintain a fun range of shows.”
The streaming company will hope that its recent major investments in new content and franchises will quickly bring rewards. Last year, the company announced multi-million pound deals to buy Roald Dahl’s works and the rights to upcoming Knives Out sequels. He will also hope that the return of the most effective series – such as Stranger Things next month – will stop customers from thinking about giving up their subscriptions.
What could they do next?
The company’s bosses said on Tuesday that they were considering a number of significant changes that could improve customer numbers and profitability.
They said they are now open to adding advertising to the service in exchange for a cheaper subscription. Reed Hastings, co-founder and chairman of Netflix, has long opposed the introduction of ads in the service, but may make a move to add another revenue stream.
The company may also impose measures against customers who share their accounts with other households. Netflix has launched crackdowns in Chile, Costa Rica and Peru against people sharing passwords and is considering expanding the scheme.
Add Comment