It's a halt in Netflix's growth curve.
After years of conquering users at high speed, the streaming giant lost 200,000 subscribers worldwide in the first quarter compared to the end of 2021. Moreover, it expects to lose more in the spring.
This is a first for more than ten years.
This news caused the action to tumble by 25% on Tuesday during electronic trading after the closing of the New York Stock Exchange (United States).
“We know that (the loss of subscribers)
is disappointing for our investors, and it's disappointing of course.
But...we're committed to hitting the targets and getting back into their good graces,” company co-founder Reed Hastings said at the analyst call.
Suspension of service in Russia costs 700,000 accounts
Netflix has had inflated numbers during the Covid-19 pandemic.
The market expected a correction, but not as strong.
The pioneer of the sector had planned to gain 2.5 million additional subscribers, and analysts expected even more, but, on the contrary, lost, bringing its total to 221.64 million.
This drop was partly caused by the suspension of the service in Russia, which resulted in a net loss of 700,000 subscriptions.
"Without this impact, we would have had 500,000 additional subscriptions" compared to the last quarter, Netflix said in its earnings release.
To restore the situation, the pioneer of the sector intends above all to tighten the screw on the side of the sharing of identifiers and passwords, which allow many people not to pay for access to the platform.
He also wants to invest more and more in the production of content so as not to give up too much ground to competition, such as Disney +, which has been a hit since its launch at the end of 2019.
Read alsoNetflix will test a way to charge for sharing passwords
Netflix estimates that more than 100 million households do not pay subscriptions.
"We just have to make sure they at least partially pay for the service they love," said Reed Hastings.
In early March, the group launched tests in South American countries to charge its customers for adding additional profiles to their account.
The platform plans to install this system in its main markets within a year.
“We are not trying to prevent people from sharing, but we will ask you to pay a little more to do so”, summed up Greg Peters, the director of operations.
In the United States, Netflix attracts 73.8% of users of video on demand services, in second place behind YouTube (95.8%) and ahead of Amazon (63.8%), according to eMarketer.
But tech behemoths like Amazon and Apple can “broadcast their content at a loss,” says Robert Cantwell.
Sales up, profits down
In all, Netflix achieved 7.9 billion dollars (about 7.2 billion euros) in turnover from January to March, almost 10% more than a year ago, thanks in particular to the increase in the number of subscribers over one year (+6.7%) and the increase in its prices.
But the company saw its net profit drop to 1.6 billion dollars (1.45 billion euros), against 1.7 billion (1.54 billion euros) in the first quarter of 2021.
It now plans to offer cheaper subscriptions, with advertising, within a year or two.
"It's definitely working for Hulu," remarked Reed Hastings.
“If you want the ad-free option, that will always be possible.
If you prefer to pay less and tolerate ads, there will be an offer for you too.
»
To diversify its sources of income, Netflix has also entered the lucrative video game market.
In September, the company bought its first game studio, Night School Studio, a California start-up.
And in November, it launched several mobile games for its subscribers, including some inspired by the universe of the science fiction and horror series “Stranger Things”.
The CFO also announced that spending growth would have to slow down, both for content and for other budgets.
