Stock price falls on loss of users

northetflix caused a bitter disappointment with its quarterly figures released Tuesday after the market close. For the first time in more than a decade, the video service reported a drop in its subscriber base and forecasts another drop in the coming quarter. The share price fell more than 20 percent in after-hours trading. Netflix shares have now lost more than half their value since the beginning of the year.

Overall, Netflix reported a 200,000 decline in its subscriber base to 221.6 million. The minus is explained by the abandonment of business in Russia, which cost 700 thousand subscribers. But even without this effect, the figures were disappointing and the number of customers was down in all regions of the world except Asia. In its home market of North America, for example, the company lost 640,000 subscribers in the last quarter. Netflix originally announced three months ago that it would add 2.5 million subscribers, and even that was well below what analysts expected.

For the second quarter, the company is now even predicting a loss of 2 million customers. This is based on the assumption that “current trends will continue”. This means that there is a risk that at least two consecutive quarters the number of customers will decrease. The last time Netflix lost subscribers was in 2011. At the time, this had to do with a fee model change that upset many users.

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Competition affects your business

Netflix was unsatisfied with its development on Tuesday: “We are not expanding our sales as fast as we would like,” it said in a statement. The company also admitted that it was wrong in thinking that the coronavirus hangover was primarily behind the recent slowdown. Netflix was growing its subscriber base at a rapid rate at the start of the pandemic, but growth has slowed significantly over the past year.

Now the company cites a number of reasons for the disappointing numbers, and one of them is increased competitive pressure. Competition in the streaming market has gotten significantly tougher and a whole range of new offerings have been added in recent years, such as Disney+ and HBO Max. Netflix has been unimpressed by this for a long time, but now admits that increased competition is also having an impact on its own business.

Netflix attributes the decline in the number of subscribers in North America to a price increase made here. The company also points to negative macroeconomic factors, such as rising inflation, weighing on the business.

Also, Netflix is ​​apparently feeling a saturation effect in some regions. The company said it’s already in so many homes today that it’s hindering its growth. Another challenge is the widespread practice of Netflix customers sharing their passwords not only within their own household, but also beyond. Netflix estimates that beyond its current 222 million subscribers, there are an additional 100 million households that get their passwords from paying customers.


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