Some users who share Netflix passwords will have to pay extra 1:06
New York (CNN Business) --
Netflix's bad year just got worse.
After shares plunged earlier this year on concerns about subscriber growth, the streaming leader said it lost subscribers when it reported first-quarter earnings on Tuesday.
Netflix now has 221.6 million subscribers worldwide.
It lost 200,000 subscribers in the first quarter of 2022, the company reported Tuesday.
The service was expected to add 2.5 million subscribers and said it expects to lose another 2 million subscribers in the second quarter of 2022.
This could be the end of sharing Netflix passwords
The report sent shares down as much as 25% in after-hours trading.
Netflix's fourth-quarter profit was $1.5 billion, down from $1.7 billion in the year-ago quarter.
Revenue rose 9.8% to $7.8 billion.
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It can't be overstated how bad this report is for the king of streaming right now.
Shares of the company have fallen more than 40% so far this year and, upon learning of earnings, investors were deeply concerned about its growth, concerns that materialized on Tuesday when Netflix not only failed to meet its own expectations , but lost thousands of subscriptions.
Netflix discontinues its services in Russia 0:37
What happened?
In its letter to investors, the company said that since launching the streaming service in 2007, the company "has operated under the firm belief that on-demand, Internet-delivered entertainment will supplant linear television."
But, he added, in the short term "we're not growing revenue as fast as we'd like."
Netflix said the pandemic "clouded the picture by significantly increasing our growth in 2020, leading us to believe that most of our slowdown in 2021 was due to the spread of Covid."
But there are many different factors behind its subscriber stagnation, including competition from traditional media companies that have entered the streaming market in recent years, as well as widespread password sharing.
Twice as good: Netflix enables a new way to recommend content you love
"In addition to our 222 million paying households, we estimate that Netflix is shared with more than 100 million additional households, including more than 30 million in the [US/Canada] region," the company said.
The company also blamed "macro factors" that are affecting many companies right now, such as "slow economic growth, rising inflation, geopolitical events like the Russian invasion of Ukraine, and some ongoing covid disruptions probably too." They have an impact."
Netflix said leaving Russia cost the company 700,000 subscribers.
The company's poor financial report is likely to roil the streaming market as many other companies have changed their business strategies to compete with Netflix.
Disney, for example, one of Netflix's biggest rivals, was down about 5% on Tuesday night.
Now what?
Netflix reveals one of its most popular genres 0:41
Netflix told investors Tuesday that it plans to turn the tide by doing what it has always done: improving service.
"Our plan is to re-accelerate our viewing and revenue growth by continuing to improve all aspects of Netflix, particularly the quality of our programming and recommendations, which is what our members value most," the company said.
The company added that it is "doubling down on story development and creative excellence" and has launched the "double thumbs-up" tool that will allow members to "better express what they really love rather than just liking."
Netflix also said it will focus more on "how best to monetize the exchange" in terms of passwords.
"Sharing likely helped fuel our growth by getting more people to use and enjoy Netflix. And we've always tried to make sharing within a member's household easy, with features like profiles and multiple streams," the company said.
"While these have been very popular, they have created confusion about when and how Netflix can be shared with other households."
The company said last month that for the past year, it has been working on ways to "allow members who share outside their home to do so easily and securely, while paying a little more."
"While we won't be able to monetize everything right now, we think it's a great opportunity in the short to medium term," they said.
Despite a dramatic slowdown in growth that calls its strategy into question, Netflix remained defiant.
"This focus on continuous improvement has served us well for the past 25 years," Netflix said.
"That's why we're now the world's largest subscription streaming service across all key metrics: paid memberships, engagement, revenue and earnings."
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