- The streaming boom during the pandemic made Netflix the winner of the crisis, now the company itself is in crisis.
- Netflix user numbers are down for the first time since 2011. And according to analysts, the downward trend is likely to intensify.
- The reason is, among other things, the competition and the war in Ukraine.
Streaming market leader Netflix had to cope with a quarter of customer dwindling for the first time in more than a decade. In the three months to the end of March, around 200,000 paid subscriptions were lost, as Netflix announced on Tuesday after the US stock market closed.
Overall, the number of users worldwide fell to 221.6 million at the end of the quarter. Netflix had actually expected 2.5 million new customers.
Investors reacted massively disappointed
The stock came under heavy pressure after the trading day and was temporarily down more than 25 percent. At the beginning of the corona pandemic, Netflix was still considered one of the big winners of the crisis. The company has had a difficult time on Wall Street for some time now.
Since the beginning of the year, the share price has already fallen by more than 40 percent. The quarterly report also weighed heavily on shares of other streaming providers like Disney, Roku and FuboTV in after-hours trading.
Impact of the war in Ukraine
Among other things, Netflix blamed the withdrawal from Russia, where all customer accounts were deactivated because of the war of aggression against Ukraine, for the weak numbers. According to the company, around 700,000 subscriptions were lost due to the measure. Without this effect, there would have been an increase of half a million users.
Netflix also explained that the statistics suffer from the multiple use of customer accounts, as many subscribers share their passwords. The company estimates that around 100 million households worldwide use the streaming service without paying.
Competition in the market is getting stronger
The biggest shock on the financial market, however, was the business outlook. It was particularly bad that Netflix expects to lose subscribers in the current quarter as well, given the increasing competition for streaming.
And this time the minus with around two million customer accounts should be even more severe. With new seasons of hit series such as “Stranger Things” and top-class films such as “The Gray Man” with Hollywood star Ryan Gosling, Netflix has strong productions at the start.
In the future, Netflix could shake one of its biggest taboos and introduce a cheaper streaming subscription with advertising clips in between. CEO Reed Hastings has so far had little left for it. Without presenting concrete plans, he suddenly showed himself open to it and explained that an offer supported by advertising could make “a lot of sense”. Netflix wants to work on such a solution in the next one to two years.
The last time Netflix had a quarter of declining subscribers was in October 2011. Despite the recent decline, Netflix remains well ahead of its peers.