Streaming slump: Weak earnings report sends Netflix stock skyrocketing
Netflix released its results for the first quarter of the year on Tuesday, with the company reporting that it lost 200,000 subscribers in the first quarter of 2022.
According to CNBC, Netflix shares “craterd” more than 20% following the announcement. According to CNBC’s report, this was Netflix’s first net subscriber loss in more than a decade and its first since becoming a premier streaming company.
The company reported revenue of $7.78 billion, compared to analysts’ forecast of $7.93 billion, and it also reported earnings per share of $3.53, down from $2.89. planned dollars. Analysts, however, had predicted that Netflix would add subscribers in the first quarter.
In addition, Netflix forecasts a loss of two million additional subscribers in the second quarter.
“Our revenue growth has slowed significantly, as shown in our results and guidance below,” Netflix management said in a letter to shareholders released Tuesday. “Streaming is outweighing linear, as we predicted, and Netflix titles are very popular globally. However, our relatively high household penetration, if you include the large number of households sharing accounts , combined with competition, creates headwinds for revenue growth.The big COVID boost to streaming has clouded the picture until recently.
The loss of subscribers followed Netflix’s price increases in the quarter; the business was still profitable.
“As we strive to re-accelerate our revenue growth, through improvements to our service and more effective monetization of multi-household sharing, we will maintain our operating margin at approximately 20%,” the letter said. It’s a reference to the company’s recent moves, after years of reporting otherwise, to reduce password sharing.
“In addition to our 222 million paying households, we estimate that Netflix is shared with over 100 million additional households, including over 30 million in the UCAN region,” the company said in the letter. “The percentage account share of our paid membership hasn’t changed much over the years, but when combined with the first factor, means it’s harder to grow membership in many markets – an issue that has been obscured by our COVID growth.”
This has been listed as a factor in Netflix’s struggles, along with growing competition and “macro factors” including inflation and the Russian-Ukrainian war.
“Our plan is to re-accelerate our viewership and revenue growth by continuing to improve all aspects of Netflix, especially the quality of our programming and recommendations, which our members value most,” the letter reads. This includes “double” content spending, as well as figuring out how to “monetize sharing”.
Netflix has touted hit shows like Bridgerton and Invent Annaas well as movies Don’t look up, the Adam project, and The Tinder scammer. However, Apple CODA beat Netflix for the first Best Picture Oscar won by a streaming service.
Stephen Silver, technology editor for The National Interest, is a journalist, essayist and film critic, who also contributes to The Philadelphia Inquirer, Philly Voice, Philadelphia Weekly, the Jewish Telegraphic Agency, Living Life Fearless, Backstage magazine, Broad Street Review and connect today. Co-founder of the Philadelphia Film Critics Circle, Stephen lives in suburban Philadelphia with his wife and two sons. Follow him on Twitter at @StephenSilver.