In the first quarter of this year, Netflix lost almost 2,00,000 subscribers. What is the rationale for this?
Netflix claims that rising inflation, fierce competition, and some Covid-related disruptions contributed to a loss of about 2,00,000 subscribers in the first quarter of this calendar year, citing geopolitical tensions (led by the war in Ukraine, which prompted a suspension of services in Russia), rising inflation, fierce competition, and some Covid-related disruptions.
According to the corporation, this is the first time in more than a decade that this has happened, and it expects more losses in the future. The present situation is in stark contrast to the streaming services giant’s earlier prediction that it will add 2.5 million customers during the period. On Tuesday, the company’s stock plummeted 26%, wiping off more than $40 billion from its market capitalization. Other entertainment-related stocks were likely hurt as well: Roku was down almost 6%, Walt Disney was down 5%, and Warner Bros Discovery was down 3.5 percent.
What is the main cause for this?
In Q1 2022, the firm lost 2,00,000 subscribers, falling far short of its prior forecast of 2.5 million new users. A total of 7,00,000 subscribers have been lost as a result of the suspension of services in Russia.
The corporation has anticipated a 2 million membership drop in the following quarter, so things are looking bleak. “Macro issues, such as weak economic growth, rising prices, geopolitical events like Russia’s invasion of Ukraine, and some prolonged interruption from COVID, are likely having an impact as well,” Netflix wrote to shareholders in a letter. Sharing accounts among homes and the firm’s rapid growth during the first two years of the epidemic, which “generated a lot of noise,” were two of the causes for the company’s loss of subscribers, according to the company.
“…In addition to our 222 million (million) paying homes, we estimate that Netflix is shared with over 100 million additional households, including over 30 million in the UCAN (United States and Canada) region,” Netflix stated. Netflix also attributed its poor growth in the quarter to increased competition from other streaming providers and even traditional television. “For the past 15 years, viewing competition has been fierce, with linear TV competing against YouTube, Amazon, and Hulu. However, as traditional entertainment firms realized that streaming is the way of the future, several new streaming services have started in the previous three years,” the company added.
Finally, the corporation claimed that its growth during the pandemic during the previous two years “clouded the picture by dramatically raising our growth in 2020, leading us to conclude that the majority of our decreasing growth in 2021 was attributable to the COVID pull forward.”
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