Netflix attributed the outage to a variety of factors, including the suspension of its service in Russia as a result of the country’s invasion of Ukraine.
Netflix acknowledged losing subscribers in the first quarter of the year in an earnings letter released on Tuesday. Following the company’s first loss of subscribers in a decade, its shares fell 25% in extended trading.
The streaming platform had 221.6 million subscribers at the end of the first quarter. Its subscriber base shrank by 200,000 between January and March. “Paid net additions were -0.2m, compared to our guidance of 2.5m and 4.0m in the same quarter last year.” “The suspension of our service in Russia and the winding down of all Russian paid memberships resulted in a -0.7m impact on paid net additions; excluding this impact, paid net additions totalled +0.5m,” the company stated.
Furthermore, it forecasts a 2 million subscriber loss in the coming quarter, compared to a 1.5 million subscriber gain in the previous quarter.
The Silicon Valley-based streaming platform reported a net income of $1.6 billion in the March quarter, down from $1.7 billion the previous year.
Netflix attributed the outage to a variety of factors, including the suspension of its service in Russia as a result of the country’s invasion of Ukraine.
“In the short term, however, we are not growing revenue as quickly as we would like.” COVID masked the picture by significantly increasing our growth in 2020, leading us to believe that the majority of our slowing growth in 2021 was caused by the COVID pull forward. “We now believe there are four major interconnected factors at work,” the company stated.
It also stated that the rate of growth is determined by factors such as the adoption of connected TVs, on-demand entertainment, and data costs. It anticipates that these factors will improve over time and that all broadband households will be potential Netflix customers.
Another factor, it said, was that Netflix is shared with an estimated 100 million or more additional households in addition to the 222 million paying households. “Account sharing as a percentage of our paying membership hasn’t changed much over the years, but when combined with the first factor, it means it’s more difficult to grow membership in many markets – an issue that was obscured by our COVID growth,” it added.
Netflix stated that it has faced stiff competition from YouTube, Amazon, and Hulu over the last 15 years. However, as traditional entertainment companies recognize that streaming is the future, a slew of new streaming services have emerged.
The company also stated that macroeconomic factors such as slow economic growth, high inflation, geopolitical tensions such as the Russia-Ukraine war, and some ongoing disruption from COVID-19 had all taken a toll.
Netflix has stated that it intends to re-accelerate its viewing and revenue growth by improving all aspects of its service, including the quality of its programming and recommendations. It credited big hits like Bridgerton Season 2 (627 million hours viewed), the biggest English language series in its history, Inventing Anna (512 million hours viewed), Tinder Swindler (166 million hours viewed), its biggest documentary film, The Adam Project, and many more (233 million hours viewed).
It also stated that it has recently launched its “double thumbs up” feature, which allows viewers to better express what they truly love as opposed to what they simply like. Netflix will be able to improve its recommendations as a result of this.
Netflix also stated that its priority is to monetize the 100 million households that use another household’s account. It acknowledged that sharing had aided in bringing viewers into the fold. “While these have been extremely popular, they have created confusion about when and how Netflix can be shared with other households,” the company added.
Netflix anticipates that non-English hits such as Squid Game, La Casa de Papel Part 4 and All Of Us Are Dead will drive much of their growth outside of the United States. “But we saw long ago that great stories can be made anywhere and loved everywhere,” it added. “This dramatically broadens the pool of creators with whom we can collaborate, increases the variety of our programming, and better serves local tastes.”
Following the release of the earnings figures, the company’s shares fell 25% to $262 in after-market trades.
