Looking back, Netflix unveiled its results of the first quarter of 2022 on April 19. A figure concentrates all the attention, the loss of 200,000 subscribers compared to the end of 2021. The company expects to lose 2 million subscribers in the second quarter of 2022. The streaming leader has already launched several avenues to stem this drop.
The reasons for a cataclysm
2.5 million more subscribers. This is what Netflix expected for its first quarter of 2021, analysts expected 2.7 million better. This objective was already far from the 4 million users attracted by the platform a year earlier. When this projection was released in January, Techcrunch reports that it was justified by the late release of high-profile content like new Bridgerton and Adam Project seasons.
China bans distribution of unauthorized video games
It will ultimately be 200,000 fewer subscribers. If the number appears low, put in connection with the 221.6 million of the platform the dynamic alert. In extended markets after the close Netflix’s value immediately fell 25%, a $30 billion loss in value. Almost anecdotally, the company’s turnover is growing slightly by 2%, reaching 7.78 billion dollars.
Netflix’s stock price plummeted following the announcement of quarterly results. Source: Google
The world leader in streaming has not been stingy with an explanation to dissect this poor performance. First of all, the suspension of its service in Russia, following the invasion of Ukraine, instantly deprived it of 700,000 subscribers. A loss offset by the arrival of 500,000 new ones. The war also led to a slowdown in its growth in Eastern and Central Europe in March.
However, this remains a bit short: Netflix has also lost users in its two American regions to gain only in that of Asia-Pacific. We should see a Covid effect here. With the end of confinements, people naturally spend less time in front of screens. Investors were not mistaken, since the announcement of Netflix’s results also led to a drop in the market value of its competitors.
The latter are also a factor in the loss of subscribers. Between the 1st quarter of 2020 and the 1st quarter of 2022, Netflix’s market share fell from 55.7% to 45.2%. In its letter to shareholders, the platform considers that for 3 years the competition from Amazon Prime, Hulu, Disney +, AppleTV, HBO Max, YouTube, has become more and more pressing. She observes, ” Traditional entertainment companies have realized that streaming is the future, many new streaming services have also been launched “.
Finally, Netflix points to password sharing, “ Account sharing as a percentage of our paying members hasn’t changed much over the years, but […] this means it’s harder to grow members in many markets – an issue that has been overshadowed by our COVID growth “. 100 million households would share their accounts around the world.
On Netflix, the game This is a True Story aims to raise awareness about the lack of access to drinking water for millions of people around the world. Picture: Netflix/Frosty Pop.
Netflix opens up to advertising and severity
On this last point, the speech of Reed Hasting, CEO of the platform, has evolved significantly. While he referred to account sharing as ” something you have to learn to live with he has now decided to fight him. The difficulties of the time remain: how to differentiate the sharing of a legitimate account, in the same household, and that which is less so?
The streaming leader has started testing a surcharge system for out-of-home sharing in Costa Rica, Peru and Chile. It should be extended to the rest of the world. No specific date has been released, but CNBC hinted that it would be for 2023.
Another paradigm shift for Reed Hasting is advertising. Absent from the platform, it could make its entrance within a year or two. Netflix thought ” very open to the idea of offering even lower prices with advertising, as a consumer choice “.
This solution could counter one of the company’s difficulties, increasing its margins. Other than raising its rates, which it did in March in the United States and Canada, it has little leverage. Advertising and the fight against account sharing represent attractive alternatives to maintain the place of world champion in streaming.