Netflix loses 200,000 subscribers in first quarter

After experiencing growth during the pandemic, Netflix is ​​now losing subscribers.

The global streaming giant said Tuesday that it lost 200,000 subscribers in the first quarter, missing its own projections of adding 2.5 million customers, and marking the first decline in a decade.

The company expects to lose two million global subscribers in the current quarter.

Netflix remains the dominant player in streaming with 222 million subscribers globally, it faces rising competition from rivals and an inevitable slowdown after a surge in business during the pandemic.

Investors were ratted by the results. After Netflix released its earnings, the stock plunged 23% in after hours trading to $267.68 a share.

Netflix blamed password sharing as obstacle to its growth, as well as other factors such as the proliferation of streaming services and the availability of connected TVs in certain markets.

Revenue increased 10% to $7.9 billion in the first quarter, compared to a year earlier. Net earnings were $1.6 billion, down from $1.7 billion in the first quarter of 2021.

“I think people deluded themselves into looking at the planet saying there’s over 2 billion households and ‘Oh my God, these guys can be like Facebook,'” said Michael Pachter, a managing director with Wedbush Securities. “Reality set in.”

Netflix faces growing competition from rival streaming services like HBO Max and Disney+. The company’s share of demand for its shows in the US has been declining, dropping to 42.4% in the first quarter from 48.1% a year ago, according to West Hollywood-based Parrot Analytics.

Streaming services aim to entice people to subscribe with compelling TV series and movies. While Netflix has not disclosed how much it plans to spend on content this year, some analysts have estimated it will deploy $19 billion. To offset the large content spend, Netflix raised prices on its subscription plans in the US earlier this year. The cost of a standard plan rose $1.50 to $15.49 a month.

But it’s a delicate balance. In the first quarter, cancellations outpaced sign ups due to the price increases and the lack of a worldwide hit like the Korean series “Squid Game.” Sign ups for Netflix fell 16% in the first quarter compared to a year ago, similar toweb. “Squid Game,” released last year, remains Netflix’s most popular show of all time.

In a letter to shareholders on Tuesday, Netflix blamed some of its challenges on customers sharing their passwords with people who don’t live with them. Under Netflix’s terms, users who don’t live in the same household need to pay for a separate subscription.

The company estimates that Netflix is ​​shared with more than 100 million additional households outside of its 222 million paying subscriber households.

“Streaming is winning over linear, as we predicted, and Netflix titles are very popular globally,” Netflix said. “However, our relatively high household penetration — when including the large number of households sharing accounts — combined with competition, is creating revenue growth headwinds.”

Those include the availability of connected TVs and geopolitical events like Russia’s invasion of Ukraine. Netflix has suspended its service in Russia.

Netflix says it will continue to grow its service by investing in “creative excellence,” pointing to its successful partnership with Shonda Rhimes. In the first quarter, it released its much anticipated second season of drama “Bridgerton,” which garnered 627.1 million hours of viewing time in its first 28 days, making it the most watched English language series, the company said.

Netflix has sought to grow its customer base abroad by investing in local language productions. For example, Netflix has seen a surge in consumption of Korean content on its platform and this year plans to release at least 25 Korean language titles up from 15 last year.

Netflix is ​​also looking at other features to increase or satisfy existing subscribers, including offering globally free mobile games for customers. In March, the streamer announced plans to buy Finish video game studio Next Games.

“There are millions of mobile games and Netflix games are faring better than most of them because most apps do not get tens of thousands of downloads,” wrote Adam Blacker, vice president of insights at Apptopia.

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