The streaming giant Netflix Last night (Tuesday) released its financial statements and presented a problematic picture to investors: on the one hand, the company has 222 million paying subscribers worldwide, and it still maintains its position as the largest streaming company, alongside good growth during the Corona period. On the other hand, the change in the number of subscribers it presented yesterday gave a poor outlook for the future.
The most difficult year for the company since it was issued, and this is just the beginning
Netflix reported a loss of 200,000 net subscribers in the first quarter, and it predicts it will lose about 2 million subscribers in the current quarter. The company is losing subscribers in critical regions like the US and Canada, while it has bright spots of growth in a region like Asia and Europe.
This is the first time Netflix has reported a drop in paying subscribers, and investors are raising an eyebrow. According to the company, tensions between Russia and Ukraine led to the loss of 700,000 subscribers, and if not for them, Netflix claims that the company had about half a million subscribers in the current quarter.
It is quite clear to Netflix that this is just the beginning – this is the most difficult year for the company since it was issued. The company expects another 2 million subscribers to be abandoned in the next quarter, and in response to the company’s stock report crashed a 23% drop in late trading.
In many ways this is a huge failure for the company, which has consistently grown by 25 million subscribers or more per year. One of the reasons Netflix is providing for the loss of these subscribers is its global price increase that has kept users away from its services. However, this whole subscription party is joined by another problem that the company decided this time to resolve.
The company’s biggest challenge is sharing passwords
People like to watch but do not want to pay – so they will ask for the subscription of a friend, a family member or just a distant person. So one of the big problems with Netflix is actually the password sharing problem.
On the face of it we would argue that this is not a widespread phenomenon, but Netflix has provided us with a glimpse into the magnitude of the problem: According to Netflix, more than 100 million households worldwide use shared passwords to access content, of which more than 30 million are in the U.S. and Canada.
So far, CEO Reed Hastings has said he has no plans to make changes, and in 2016 said it was something to learn to work with – because there are legitimate password shares. Now, in a letter to shareholders, Netflix has admitted that it deliberately allowed that sharing, Users connect to the service; but with growing competition from Disney, Apple, Warner Bros. and other Netflix-growing companies, she realized she had to start paying those millions.
It is not yet clear what it will look like and what steps the company will take, but this time it sounds like a serious warning that will lead to root canal treatment for this problem, and it is likely to reach us next year, so it is closer than we think.
Netflix plans to reach new audiences with the help of cheaper packages that include advertisements
At the same time, Netflix is considering another feature that it has given up over the years and is now making a 180-degree turn because of its problematic situation. The streaming giant is considering offering packages at lower prices that include ads, according to CEO Hastings: “Those who have followed Netflix know that I have objected to the complexity of advertising, and I am a big fan of subscription simplicity. But as much as I’m a big fan of it, I’m an even bigger fan of consumer choice – and allowing consumers who want to get a lower price that includes tolerable advertising, that makes a lot of sense. “
Market shares are affected by Netflix reports
He points out that “pretty clearly it works for Hulu, Disney does it, HBO Did it. I do not think we have much doubt that it works. “ And there is no doubt that Hastings is looking at the competition closely, because it is clear to him that the competition is only growing.
These companies are particularly influential on each other, and you can see how the companies’ shares in the market were affected after Netflix’s reports: Disney lost 5.2% in long-term trading, Warner Bros. (owner of HBO Max) lost 2.8%, and Roku, the maker of streaming converters, fell At 8.3%.