Stock rushes down
Netflix is losing customers massively
4/20/2022 1:49 am
Netflix emerged as a big winner from the Corona crisis. Now the number of users is collapsing, for the first time since 2011. One reason is the Russian war in Ukraine. The downward trend is likely to intensify. Shareholders are shocked.
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 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. In addition to increasing competitive pressure, the consequences of the Ukraine war also had an impact on the streaming giant’s balance sheet.
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, but it has had a difficult time on Wall Street for a long time. Since the beginning of the year, the share price has already fallen by more than 40 percent. The quarterly report also gave shares from other streaming providers such as Walt Disney, Roku and FuboTV a significant boost in after-hours trading.
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 on a quarterly basis. 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.
Advertising is no longer taboo
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.
To get growth going again, Netflix could even shake one of its biggest taboos in the future and introduce a cheaper streaming subscription with interspersed commercials. There has never been anything like it at Netflix – CEO Reed Hastings had little time for it until now. Without presenting concrete plans, he suddenly showed himself open 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. For comparison: The big rival Disney + had almost 130 million customers at the end of 2021. But Netflix also had to cut back on profits in the past quarter. The surplus fell compared to the previous year by about six percent to 1.6 billion dollars (1.5 billion euros). Although sales increased by around ten percent to 7.9 billion dollars, they still just missed the average expectations of analysts.