Shares of Netflix fell an incredible 25% after revealing that they lost hundreds of thousands of subscribers this year, which stopped its many years of continuous expansion and potentially threw it in the opposite direction.
The US streaming giant’s customer base shrank by 200,000 in January-March, the company said in a quarterly report released on Tuesday – and now forecasts a loss of another 2 million in April-June.
Teasing the California-based company after it reported its losses, Tesla billionaire tycoon Elon Musk said: “The vigilant virus makes Netflix invisible.”
Netflix said the Covid boom had “made a lot of noise” and blamed the delay in returning to normalcy after two years of blocking. He also accused the sharing of passwords about the growth of canceled accounts, as he estimated that about 10 million households around the world watch his service for free, using the account of a friend or other family member.
The company has already begun testing various ways to restrict password sharing in Chile, Costa Rica and Peru – and could expand elsewhere if successful. The bosses are also considering turning the service into a low-fee subscription supported by ads.
Netflix also claims that the market has already been “saturated” by growing competition from streaming services, including Disney +, Apple TV, Now TV, Warner Bros Discovery and Paramount, the cost of living crisis in the US, Canada and Western Europe. and its decision to stop streaming in Russia following Putin’s invasion of Ukraine in February.
This is despite the fact that the service is releasing various recent hits, including Squid Game, Bridgerton, Sex Education and the political drama Anatomy of a Scandal.
Following the news that it lost 200,000 subscribers, shares of Netflix fell 25%. So far this year, its shares have fallen by about 40% after markets shook in January when they announced that subscriber growth would slow significantly in 2022. If the decline continues until the regular trading session on Wednesday, Netflix shares will have lost more than half of their value so far this year – destroying about $ 150 billion (£ 115 billion) of shareholder wealth in less than four months.
This is the first time Netflix subscribers have declined since streaming became available in much of the world outside of China six years ago.
Following the news that it lost 200,000 subscribers, its shares fell by 25%. So far this year, its shares have fallen by about 40% after markets shook in January when they said subscriber growth would slow significantly in 2022.
In response to the development, Elon Musk mocked in a tweet: “The virus of the awakened mind makes Netflix invisible for viewing”
General views of the Hollywood campus of Netflix on Vine on April 19, 2022
Netflix CEO Reid Hastings during the See What’s Next event at Villa Miani in Rome, Italy, April 18, 2018.
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. But the company launched its first major counter-offensive against password-sharing last month, allowing observers to add up to two other users for just $ 2 in some countries. Netflix is not the only website affected by fraud, as subscriptions to HBO Max and Disney + have also been robbed by cunning so-called markets
The story of rising Netflix prices in the UK
The Netflix logo can be seen on the TV remote control in this illustrative photo taken on January 20, 2022.
May 2014: Netflix announced an increase in its monthly fee for streaming movies and TV shows from £ 5.99 to £ 6.99.
The price increase was immediate for new subscribers, but was postponed by two years for existing members.
But Netflix has allowed subscribers to continue to pay £ 5.99 a month if they opt for a lower-quality “SD” service.
May 2016: Netflix raises its monthly price for major users in the UK from £ 5.99 to £ 7.49 per month.
A similar price change occurred for US customers, whose subscription fee increased by $ 2 (about £ 1.40 at the time).
Anyone who signed up for Netflix when launching in the UK would receive the standard £ 5.99 package per month.
But in an email to subscribers, Netflix wrote: “When we raised prices for new Netflix members in 2014, we kept your price the same for two years. Your special prices are expiring and your new price will be £ 7.49 per month. ‘
October 2017: The company raises prices in both the UK and the US for the first time in two years. The price of the standard package increases by 50 pensions to £ 7.99 per month. The premium package jumped to £ 9.99 a month, an increase of £ 1.
At the time, Netflix said the price change reflected additional content added to its service.
May 2019: Netflix confirms that British customers will see an increase in the price of the standard tariff from £ 7.99 to £ 8.99. The premium rate was also increased by £ 2 to £ 11.99.
January 2021: Netflix increases subscription fees for users in the United Kingdom as the country enters its third blockade amid a coronavirus pandemic.
The standard package – which allows two screens to access the account, as well as HD – has been increased by £ 1 per month, from £ 8.99 to £ 9.99.
The premium package – providing access to four account screens and Ultra HD – increases by £ 2, from £ 11.99 to £ 13.99. The basic package remained at the same price.
March 2022: Netflix raises prices for the second time in just over a year.
The base and standard plans increase by £ 1 per month to £ 6.99 and £ 10.99 respectively, while the premium level increases from £ 13.99 to £ 15.99.
The company told shareholders on Tuesday: “Our revenue growth has slowed significantly. Streaming is gaining more than linear, as we predicted, and Netflix titles are very popular worldwide.
“However, our relatively high household penetration – when it includes a large number of households sharing accounts – combined with competition, creates barriers to revenue growth.”
Netflix was previously stung by a reaction from customers in 2011 when it revealed plans to start charging for the then-emerging streaming service, which had previously been included for free with its traditional DVD mail service before its international expansion. .
In the months following the change, Netflix lost 800,000 subscribers, prompting Netflix CEO Reid Hastings to apologize for the failed split.
Tuesday’s announcement was a sobering decline for a company that was backed two years ago when millions of users locked up at home were desperately looking for diversions – a void that Netflix was happy to fill. Netflix added 36 million subscribers in 2020, the biggest annual increase since the debut of the video streaming service in 2007.
But now Hastings believes these huge gains may have blinded management. “Covid has made a lot of noise about how to read the situation,” he told a video conference on Tuesday.
Netflix began moving in a new direction last year when its service added video games at no extra charge in an attempt to give people another reason to subscribe.
Escalating inflation over the past year has also shrunk household budgets, prompting more consumers to control their spending on discretionary items. Despite this pressure, Netflix recently raised prices in the United States, which has the highest household penetration – and where it has had the most problems finding more subscribers.
Netflix lost 640,000 subscribers in the United States and Canada in the last quarter, prompting management to point out that most of its future growth will come in international markets. Netflix ended March with 74.6 million subscribers in the United States and Canada.
The news exacerbates the growing problems for the streaming service as the influx of registrations from a seized audience during the pandemic began to slow.
This is the fourth time in the last five quarters that Netflix subscriber growth has fallen below previous year’s earnings.
Investors now fear that its streaming service may be in a state of disrepair, fueled by growing competition from well-funded competitors such as Apple and Walt Disney.
Jefferies analyst Andrew Uerkwitz told the FT that the announcement was a “change of tone” from Netflix, which he said had rarely admitted to competing in the past. He added: “They appear to be in recovery mode.”
Paolo Pescatore, an analyst at PP Foresight, said the loss of subscribers was a “reality check” for the company as it sought to balance subscriber retention with increased revenue.
“While Netflix and other services were key to blocking, consumers are now thinking twice about their buying behavior based on changing habits,” he told the BBC.
Aptus Capital Advisors analyst David Wagner said it was now clear that Netflix was facing an impressive challenge. “They are in someone’s land,” Wagner wrote in a research note Tuesday.
Los Gatos, California, estimates that about 100 million households worldwide view the service for free using a friend’s or other family member’s account, including 30 million in the United States and Canada.
Earlier, Netflix bosses said that password sharing is “something you have to learn to live with because there are as many legitimate password sharing as sharing with your spouse, children … so there’s no bright line and we do it well as it is’.
In a shareholder note, the company said: “Sharing has probably helped our growth by making more people use and enjoy Netflix. And we’ve always tried to make sharing a household member easy, with features like profiles and multiple streams.
However, Netflix has indicated that it will expand a pilot program running in three Latin American countries – Chile, Costa Rica and Peru – to …
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