Shares of Netflix lost more than 35% of their value in New York on Wednesday morning after the streaming giant announced it had lost more than 200,000 subscribers in the first three months of the year and said so and expects to lose another 2 million next quarter.
The sharp drop in value – the biggest for the service in more than a decade – comes as subscribers rethink their commitment to streaming services, which rose sharply during the months of peak blocking. Netflix expected to add 2.5 million customers in the first quarter.
A number of competing services, including Disney, Warner Bros. Discovery and Paramount, often with deeper libraries of content to draw from, have also entered the market. Shares of Netflix, which had already fallen 40 percent year-on-year, now fell from $ 700 in November to $ 244 when the market opened, a drop that is approaching two-thirds.
The company said on Tuesday it had experienced a “transverse increase in revenue”. Subscription prices have recently risen despite signs that consumer growth is slowing, with a major monthly package now costing US customers $ 15.49.
“We are definitely experiencing higher levels of market entry and increased competition,” said Ted Sarandos, co-executive director.
In terms of capitalization, Netflix now costs $ 109 billion, a figure that will make it difficult for its Los Gatos, California-based management to raise money to fund an investment in content production on which subscriber growth depends.
The merger of negative forces, the end of the pandemic, the loss of 700,000 subscribers in Russia, high consumer inflation in many leading markets, forcing households to rethink their budgets, have hit the mark.
Elon Musk, Tesla’s chief executive, who is currently making a hostile offer to take over Twitter, says the “mind-awakening virus” is behind the decline in Netflix’s stock – not competition, password cracking or inflation. “The Awakening Mind Virus makes Netflix invisible,” Musk tweeted.
Wednesday’s crash comes after a period of spectacular growth for the company, combined with demand for shares from investors. Netflix, like Peloton and GameStop, was the beneficiary of cash flowing through economies during the pandemic, fueling demand for stocks.
Shares of Netflix rose 86% from the end of 2019 to 2021, while the S&P 500 rose 48%.
Reed Hastings, co-CEO, said tackling account sharing is now a priority for the company. Approximately 100 million households use unpaid bills. “When we were growing fast, it wasn’t a high priority, but now we’re working very hard on it,” Hastings said.
The company also said it would try to boost growth by improving the “quality of our programming” and would consider introducing a lower price, an advertiser-supported subscription option.
“I was against the complexity of advertising and a big fan of the simplicity of the subscription,” Hastings said on Tuesday. “But as much as I’m a fan of it, I’m a big fan of consumer choice.”
“No one expected Netflix to announce that they had lost subscribers. They expected a slowdown in subscriptions, but seeing Netflix lose subscribers is a big deal, “Ipek Ozcardeskaya, a senior analyst at Swissquote Bank, an online broker, told the Wall Street Journal.
“People are asking, ‘Is this worth it?'” Ozcardeskaya said. “As prices rise, the threshold of value rises higher and this pushes people to the exit.”
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