Netflix is the latest victim to the recessive tightening of purse-strings globally in the face of war; the streaming service suffered its first loss in global subscribers in its history, causing a large-scale sell-off of shares. With its largest loss in more than a decade…
The company’s devaluation came after 200,000 subscribers cancelled in the January-March period, according to a quarterly report announced on April 19; its stock value dropped by 23%, causing worries that have been climbing since seeing a surge from a pandemic-locked audience locked down during the early phases.
Which wasn’t at all the conservative increase of 2.5 million subscribers predicted by Netflix managers. The outcome caused the streaming service’s shares to plummet 25 percent in after-hours trading.
Biggest Hit Since 2011 and Russia-Ukraine Protests
It’s the first time we’ve seen Netflix’s subscribers drop in numbers since the streaming service became accessible globally except in China six years back. The fall this year was rooted in part from Netflix’s decision to cancel their offerings in Russia to protest their war with Ukraine, causing a drop of 700,000 subscribers.
Russian Netflix users actually filed their own class lawsuit against the streaming goliath for exiting Russian markets, claiming they deserve 60 million roubles ($700,000) in compensation, according to the RIA news company.
Netflix gave a press release in March saying it suspended its contract with Russia and had temporarily blocked any future collaborations and acquisitions in the nation as it evaluated the effect of Moscow’s invasion of Ukraine.
Russian users worked with a law firm representing Netflix and users filed a class action lawsuit against the US service with the District Court of Moscow, according to RIA.
Their objective was to protest being legally violated by this, which goes against Russian user rights due after the service flatly refused to offer services in Russia.
Netflix gave no immediate response to a request for commentary.
Many foreign firms have also announced temporary suspensions of shops and factories in Russia or have confirmed they will permanently leave because Moscow began what it called “a special military operation” on the Ukrainian nation in February.
Growth Outlook
This blog blow is the fourth time in the past five quarters that Netflix’s subscriber growth was underperforming against returns of the previous year, a fever state that has been amplified by worsening competition from large rivals such as Apple and Disney.
This blow also follows the firm’s increase of 18 million subscribers in 2021, its smallest yearly growth since 2016. Which is a distinct contrast against a growth of 36 million subs during 2020 when everyone was held captive at home and needing entertainment, which Netflix was able to speedily and simply take advantage of using its stockpile of high-quality original shows.
Crackdown on Households Sharing Passwords
Netflix will have to respond. The company believed it would regain its momentum, but this latest blow suggests it might not be the case. COVID increased the amount of noise on what the situation actually was.
Netflix will need to reduced how many households are able to share subscriber passwords. In the past, it allowed multiple households to access its streaming service using a single account, and these changes should occur in the next year or so.
The company says that around 100 million households globally are watching its service for free by using sharing accounts of a friend or some other family member, including 30 million in North America and Canada combined. Which means more than 100 million households already are viewing Netflix and just need to be extracted more, according to the company.
To crack down on the practice and produce more people who actually pay for their own accounts, Netflix says it will implement a test it used last month in Chile, Costa Rica and Peru that lets subscribers add up to two people who live outside their homes to their accounts for an extra fee.
Other Reasons for Losses
Netflix closed in March with 220 million global subscribers. The subscriber loss affected Netflix’s finances in the first quarter after the firm’s gains dropped 6% from last year to $1.6 billion, which means $3.53 per share. Revenue however greaw 10% from last year to almost $7.9 billion.
As the pandemic lessens, people have other means of entertainment, there are other video streaming rivals working hard to bring new viewers into their programming. Apple, for example, held the exclusive permissions to “CODA,” which outdone Netflix’s “Power of The Dog,” including other movies, and even won Best Picture at the Academy Awards.
With inflation climbing there has also been a squeeze on households, causing more consumers to stem their spending on non-essential items. Despite this, Netflix recently increased its costs in the U.S., where it has the most household use — and where it’s had the most struggle finding more subscribers. For the latest quarter, Netflix lost 600,000+ subscribers in the U.S. and Canada, causing management to say most of its future growth will come in foreign markets.
Meanwhile, Netflix also wants to give people more cause to subscribe by adding video games at no extra fee — a feature that started its roll outs in 2021.
