Netflix will start ‘spending back’ on content after losing subscribers

Netflix lost 200,000 subscribers in the last quarter, a significant setback for the streaming giant, which has seen its users grow exponentially over the past decade when the company revealed it fell far short of its low launch expectations. 2.5 million subscriber additions. 2022

The streaming giant lost subscribers in almost every region except the Asia-Pacific market, where it recorded a net increase of over 1 million subscribers. Netflix lost about 640,000 subscribers in the US/Canada region in the first quarter, a larger drop than its previous subscribers in the region last year, and lost 300,000 subscribers in Europe, the Middle East and Africa and 350,000 in Latin America. . The losses are expected to continue into the second quarter, when Netflix predicts it will lose another 2 million subscribers.

In a pre-recorded interview, Netflix CEO Reed Hastings said that Streamer would look to enable ad-supported tiers “in the next year or two,” a move Netflix executives have previously opposed. “Anyone who follows Netflix knows that I was against the complexity of advertising and was a big fan of the ease of subscription. “As much of a fan as I am, I’m a big fan of consumer choice, and it makes a lot of sense for consumers who want to have low prices and be tolerant of advertising to get what they want.” said Hastings. saying. “Think of us as open enough to offer even lower prices, with advertising as a consumer choice.”

According to CFO Spencer Neumann, Streamer is “reducing” some of its content spend over the next two years to drive revenue growth. “We are increasing our costs for content and non-content,” Neumann said in a pre-recorded interview. “We’ve tried to be smart and prudent in terms of increasing these costs to reflect the reality of business revenue growth.”

When Netflix announced its earnings on Tuesday, Wall Street already had low expectations for the streaming giant, given the company’s poor fourth-quarter performance and its poor first-quarter forecasts. The addition of subscribers is also likely to be influenced by Netflix’s decision to suspend the service in Russia, where Streamer said it had around 700,000 subscribers due to the invasion of Ukraine. Netflix, which does not expect losses in Russia, said in a letter to shareholders that Streamer would add 500,000 subscribers in the first quarter.

Netflix had previously written about its low subscriber expectations for “The Latest Content Slate” from season two onwards. bridgeton s the adam project Released in March. Last quarter, Streamer also said in a letter to investors that “increased competition” from competing streaming services “could affect [Netflix’s] Some marginal growth,” the company said, however, saying it has seen steady growth in regions where other competing streamers have started.

But with its poor first-quarter performance, Netflix said its slowdown is due to a number of factors, including switching accounts, an ongoing pandemic and, again, increased competition from rival streamers. In a letter to shareholders on Tuesday, Netflix said that of its estimated $222 million subscription, more than 100 million was shared with users outside paying households, with a total of $30 million reported in the US region alone. USA.

To address the account sharing issue, Netflix began testing a new feature in March to monetize password sharing as another way to increase revenue as subscriber additions are discontinued. The function, which was published in Chile, Costa Rica and Peru, imposes a small fee on holders of main accounts to add users to their families outside of their accounts, although it is not clear what kind of impact this rule has had on the tickets. . Netflix has yet to use this feature globally, although it seems likely that widespread password distribution is inevitable given its impact on Netflix’s growth.

To offset the slowing growth, Netflix continued to expand its in-game acquisitions with quarterly acquisitions of Texas-based Boss Fight Entertainment and upcoming games in March, the latter of which it created Weird stuff Puzzle. The purchase of the upcoming games is expected to be completed in the second half of 2022.

The last time Netflix announced the loss of a subscriber, in late 2011, it forced activist investor Carl Icahn to launch a hostile takeover by activists. Netflix responded by imposing poison pills to keep Icon’s share below 10%. Aiken would leave the company in 2015 and make a profit of $2 billion, although with premature sales he lost $40 billion in profit from accelerating video streaming.

While Netflix’s outrage over video streaming was clearly justified ten years ago, the crisis the company is facing now could force investors and other entertainment companies to reconsider its opportunities in the global marketplace.

April 19, 1:15 PM PST An updated story that reflects the fact that Netflix lost 200,000 subscribers last quarter.