Netflix reported a loss in subscribers for the first time, down 200,000, citing inflation, emerging competition from the likes of Disney+ and Amazon, as well as the Ukraine war as contributing factors.
Its first quarter results sent Netflix’s stock plummeting 26 per cent after the bell yesterday, wiping $40bn of its market value.
The doom and gloom continued, with Netflix predicted a further two million subscriber losses as it heads into the next quarter.
The company didn’t rule out advertising as a potential saving grace, with Netflix CEO Reed Hastings stating: “Those who have followed Netflix know that I’ve been against the complexity of advertising, and a big fan of the simplicity of subscription”.
“But, as much as I’m a fan of that, I’m a bigger fan of consumer choice.”
Patrick Morrell, Director of Strategic Publishing and TV Development, The Trade Desk commented on the results: “As household budgets tighten, ad-funded TV is an increasingly popular choice and one that makes good sense for streamers to offer. Discovery is leading the way with its recently announced ‘Ad-lite’ product, while Disney has announced plans to offer an ad-supported plan later this year in addition to its standard paid-for service.
“We expect to see a proliferation of these types of hybrid offerings across the streaming sector in the next 12 months – the question is, will Netflix leave the strategies of its competitors unanswered?”
Dominic Sunnebo, Global Insight Director, Kantar, Worldpanel Division added: “Netflix reaction to their first subscriber loss is very reactive -this day has been coming for some time and strategies needed to be put in place earlier to avoid rushed implementation. The Netflix business does however remain sound, with a mostly highly loyal and engaged customer base, but as this subscriber base is staring to hurt from economic pressures, Netflix needs to offer alternative models to support the changing realities.
Even Elon Musk weighed in on the results, stating that “woke mind virus” makes Netflix unwatchable.
Netflix’s first-quarter revenue grew 10 per cent to $7.87bn, below Wall Street’s forecasts. It reported per-share net earnings of $3.53, beating the Wall Street consensus of $2.89.