Netflix tanks on first net subscriber loss in a decade – The Average Joe
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    Netflix tanks on first net subscriber loss in a decade

    victorlei

    April 20, 2022

    Yesterday, Netflix (NASDAQ:NFLX) reported first-quarter earnings, which confirmed a slowdown in streaming services — sending its stock down 25% in after-hours trading.

    What’s the big deal? Inflation is taking its toll on consumers — and non-discretionary goods like streaming are one of the first to go:

    • 35% of Americans have already cut services, and 1.5M streaming accounts were canceled among UK households in the first three months of 2022.

    In its first-quarter earnings, one number mattered the most:

    • 200K net decrease in subscribers — the first time it lost subscribers in over a decade.
    • Netflix expects its subscriber count to fall again in the next quarter.

    Streaming has become a highly competitive market — with media investors worried video streaming growth has peaked.

    On edge: With subscriber growth slowing, stakes are getting higher for Netflix. According to The Information in March, Netflix execs told employees to be mindful of spending and hiring — while thinking of ways to mitigate low revenue impacts. Here’s what it’s tried so far:

    • Growing internationally in countries like India — as the American market becomes more saturated.
    • Expanding into gaming — with three gaming studios already purchased.

    Netflix’s CEO once said it would target 100M subscribers in India — which hasn’t played out how he wanted. Four years later, Netflix has 5.5M subscribers in India — trumped by Disney and Amazon with millions more subs in India.

    All roads lead to advertising: Tech analyst Ben Thompson of Stratechery argues Netflix should build an advertising business. He believes an advertising-supported subscription tier would:

    • Make its service more competitive and reduce users sharing accounts — which Netflix has been cracking down on.
    • Make it easier to raise prices — giving an alternative for those against higher prices.

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