The streaming platform has reported a drop in its subscriber base.
(Photo: Reuters)
san francisco Streaming service Netflix has reported a drop in subscribers for the first time in a decade. The customer base had shrunk by 200,000 subscribers in the first quarter, the company announced after the market closed on Tuesday evening in the USA. Netflix shares fell more than 25 percent in after-hours trading. Other streaming services also gave way in their wake, such as Disney + with a minus of three percent.
Since mid-November, Netflix has lost around half of its rating on the stock exchange. Netflix had predicted 2.5 million new customers. And there is no improvement in sight. The outlook for the current quarter was also bleak, with an expected drop of two million subscribers.
Netflix founder Reed Hastings acknowledged that his expectations in terms of subscriber growth had not been met. “When we were growing fast, that wasn’t a priority. But now we’re working very hard on it,” Reed said. There are around 100 million customers who use Netflix but do not pay for it. He offered investors a way out to generate new income: In the future, Netflix wants to take more money for sharing accounts.
Reed cited the strong competition from other streaming providers as another reason for the decline in subscription numbers. “I know that’s disappointing for investors,” Hastings said. But his company is working hard to compete.
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The farewell to the Russian market is also relevant for the decline in the number of customers, suspected Raj Shah from the consulting firm Publicis Sapient: “In March, Netflix withdrew from Russia and lost a million subscribers overnight,” he said. Another reason: “The price increase in the USA and Canada in January scared off new customers. Subscribers in the UK and Ireland are now also having to dig deeper into their pockets.” Other countries are likely to follow suit.
Netflix founder Hastings also admitted to working on a new, advertising-financed subscription model. “I was against it,” he said. For him, the advantages of a simple price model would have outweighed so far. But he can also change his mind. However, it will probably take another one to two years before an advertising-financed model is available for customers. Netflix doesn’t currently allow commercials, but companies can pay for product placements.
Netflix currently has 221.6 million subscribers. The company last reported a decline in October 2011. Revenue for the first quarter grew 10 percent to $7.9 billion, not quite as strong as forecast. That’s $3.53 a share. Netflix had already surprised investors after the fourth quarter of the past fiscal year with a gloomy outlook. Since then, the stock is down about a third in regular trading through Tuesday and more than half since November’s peak of about $700.
Even before the new business figures were published, analysts were assuming a difficult year for Netflix. Competitors like Disney+ are expanding their offerings. In addition, the streaming provider competes with video websites such as YouTube and TikTok and other entertainment offerings. According to a study by Deloitte on digital media trends published in March, consumers between the ages of 14 and 25 – “Generation Z” – spend more time playing computer games than watching films, TV series or even listening to music.
However, analysts remain positive about Netflix’s future in the medium term. The average price target is $501 per share, according to calculations by S&P Global Market Intelligence. For comparison: On Tuesday, the Netflix paper was around $ 333 after hours.
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