Netflix has lost members for the first time in 10 years at the beginning of the year, and the company warned it expects to lose even more in the spring, sending its stock down again on Tuesday.
The streaming giant’s stock dropped nearly 20 percent after it was revealed that it had lost 200,000 members internationally in the first quarter. The company was expected to attract 2.5 million users, according to Wall Street.
In the current quarter, Netflix expects to lose two million global customers.
Netflix officials made a surprising announcement, saying they were now open to adding advertising to the service in exchange for a lower-cost membership.
Reed Hastings, co-founder and chairman of Netflix, has long opposed the addition of commercials or other forms of advertising to the service.
The reduction was attributed to a number of causes, including the company’s massive size, greater competition, the economy, the crisis in Ukraine, slower internet rollout, and the significant number of users who share their Netflix accounts with non-paying homes. It further stated that the move to shut down operations in Russia cost the corporation 700,000 new hires.
Netflix said in a note to investors: “Streaming is winning over linear, as we predicted, and Netflix titles are very popular globally. However, our relatively high household penetration – when including the large number of households sharing accounts – combined with competition, is creating revenue growth headwinds.”
Netflix recently launched a crackdown on customers who share their Netflix accounts with other families in Chile, Costa Rica, and Peru. It is predicted that the plan would be expanded.
Netflix is being shared with over 100 million additional households, according to its most recent financial report, an issue that makes it “harder to build membership in many areas” and a problem that was hidden by the company’s success during the pandemic. “Our plan is to reaccelerate our viewing and revenue growth by continuing to improve all aspects of Netflix – in particular, the quality of our programming and recommendations, which is what our members value most,” Netflix said.
On a call with investors Hastings said Netflix had always had a lot of viewers who used paying members’ accounts but when the company was growing fast that “wasn’t a high priority”.
“These are already over 100m households that are already choosing to view the service. They love the service, we have just got to get paid at some degree for them,” he said. Hastings said Netflix was also looking at the range of its plans and was weighing whether to add a cheaper, ad-supported subscription as “a consumer choice”, a model he has avoided in the past.
“We have gone through a lot of changes and we have always figured them out, one by one,” said Reed. “It’s super exciting. We are going to figure this one out.”
Netflix’s paid global subscriber base fell to 221.6 million in the third quarter, down from 221.8 million the previous quarter. On $7.8 billion in revenue, the corporation profited $1.6 billion in the quarter.
This is Netflix’s second batch of poor numbers in a row. When the business disclosed that subscriber growth was slowing in January, investors slashed its valuation by over $45 billion (£33 billion).
This article was amended on 20 April, 2022. The company made $7.8bn in sales, not $7.8m.