By Michael Liedtke
Associated Press
Netflix suffered its first loss of subscribers in more than a decade, causing its shares to plunge 25% in extended trading on Tuesday.
This comes amid concerns that the pioneering
streaming service
may have seen its best days.
The company's customer base shrank by 200,000 subscribers during the January-March period, according to its quarterly earnings report released Tuesday.
It's the first time Netflix subscribers have dropped since the streaming service became available in most parts of the world outside of China six years ago.
This year's drop was due in part to Netflix's decision to withdraw from Russia in protest of the war against Ukraine, resulting in a loss of 700,000 subscribers.
Netflix has acknowledged that its problems are great by projecting a loss of another 2 million subscribers during the April to June period.
Competition from other platforms has impacted the company.Getty Images/iStockphoto
If the stock slump lasts until Wednesday's regular trading session,
Netflix shares will have lost more than half their value so far this year
, wiping out some $150 billion of net worth. of its shareholders in less than four months.
Netflix hopes to turn the tide by taking steps it has previously resisted, such as
blocking account sharing
and introducing a cheaper, ad-supported version of its service.
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The company suffered its biggest hit since losing 800,000 subscribers in 2011 after it unveiled plans to start charging separately for its then-basic
streaming service
, which had been bundled for free with its traditional DVD-by-mail service.
Customer reaction to that move prompted an apology from Netflix CEO Reed Hastings.
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The latest subscriber loss was far worse than Netflix management's forecast for a moderate gain of 2.5 million subscribers.
The news compounds the company's problems since the wave of subscriptions began to slow down during the pandemic.
It's the fourth time in the past five quarters that subscriber growth has fallen short of the prior year's earnings, a malaise that has been magnified by stiff competition from well-funded rivals like Apple and Disney.
The pullback comes after the company added 18.2 million subscribers in 2021, its weakest annual growth since 2016. That contrasts with an increase of 36 million subscribers during 2020, when people were in quarantine and needed to be entertained, a service that Netflix was able to quickly and easily provide with its arsenal of original programming.
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Netflix has predicted that it will regain its momentum, but on Tuesday it faced problems that make it difficult to achieve this goal.
“COVID-19 created a lot of noise about how to read the situation,” Hastings said in a video conference where he reviewed the latest numbers.
Among other things, Hastings confirmed that Netflix will begin cracking down on the sharing of subscriber passwords, which has allowed multiple households to access its service from a single account, and that the changes will likely take effect over the next year. .
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The Los Gatos, California-based company estimates that some 100 million households worldwide view its service for free using the account of a friend or other family member, including 30 million in the United States and Canada.
"That's over 100 million households already choosing to watch Netflix," Hastings said.
“They love the service.
We just have to get them to pay us a certain amount for them.”
To end this practice and encourage more people to pay for their own bills, Netflix said it will expand a test introduced last month in Chile, Peru and Costa Rica that allows subscribers
to add up to two people who live abroad to their accounts .
from their homes for an additional fee.
Netflix closed March with 221.6 million subscribers worldwide.
The drop in subscribers has hurt Netflix's finances in the first quarter, in which the company's profit fell 6% from a year ago to $1.6 billion, or $3.53 a share.
Revenue was up 10% from last year, to nearly $7.9 billion.
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As the pandemic subsides, people have found other things to do, and other streaming video services are hard at work attracting new viewers with their own award-winning programming.
Apple, for example, has exclusive streaming rights to the movie
CODA
, which dwarfed Netflix's
The Power of the Dog
by winning best picture at last month's Academy Awards.
Rising inflation in the past year has also squeezed family budgets, prompting more consumers to curb their spending on discretionary items.
Despite that pressure, Netflix has recently raised its prices in the United States, where it has its highest penetration in homes, and where it has had the most trouble finding more subscribers.
In the latest quarter, Netflix lost 640,000 subscribers in the United States and Canada, prompting management to say that most of its future growth will come from international markets.
Netflix is also trying to give people another reason to subscribe by adding video games at no extra charge, a feature it started rolling out last year.
