Netflix has almost completely withdrawn from Russia. This is now making itself felt in the quarterly figures. For the first time in more than ten years, the number of Netflix subscriptions has dropped. The streaming service has lost 200,000 subscribers.
Since October 2011, the number of Netflix subscribers has only gone in one direction: up. But this streak of success has now been snapped. For the first time in more than ten years, the streaming company had to announce a decline in subscriber numbers.
At the end of the first quarter, the number of Netflix subscriptions was down 200,000 to 221.6 million. The streaming service had forecast an increase of 2.5 million new customers.
Why has the number of Netflix subscriptions dropped?
There are several factors to consider when looking at the decline in subscriptions. First and foremost is the streaming service’s withdrawal from the Russian market. At the beginning of March, the company announced that it was withdrawing completely from Russia due to the attack on Ukraine. Previously, the service had initially put all productions on hold.
As a result of the suspension of Russian accounts alone, Netflix has lost 700,000 paying subscription customers, according to the company’s letter to investors.
According to Netflix, account sharing is also a big problem. On the one hand, the service has a “relatively high household penetration”. On the other hand, however, there are a “large number of households with shared accounts.” The streaming service estimates that around 100 million households worldwide use Netflix without paying.
The large COVID growth in streaming has clouded the picture until recently.
Growing competition from Amazon Prime or the still-new Disney Plus streaming service also created “headwinds in revenue growth,” he said.
Is Netflix still profitable, though?
But despite the declining number of Netflix subscriptions, the streaming service was able to increase its revenue in the first quarter. Here, Netflix increased by around ten percent to 7.9 billion US dollars.
Profits also climbed – from around 600 million US dollars in the previous quarter to around 1.6 billion US dollars. In the first quarter, earnings per share thus amounted to 3.53 US dollars. In the previous quarter, the figure was 1.33 US dollars.
The stock market reacts: Netflix share collapses
The investors:inside have the decline in the subscription figures and the failure to achieve expert forecasts directly waved off. The Netflix share lost about 25 percent after trading hours. Since the beginning of the year, Netflix has already lost more than 40 percent of its value.
By way of comparison: In November, Netflix shares were still at around 700 US dollars; they currently stand at just over 300 US dollars. But the competition also felt the stock market’s displeasure directly. The streaming service Disney Plus also lost around three percent on the stock market in the wake of the Netflix announcement.
What are the forecasts for the second quarter?
The current quarter could also mean a further loss of subscriptions for Netflix. The streaming service is forecasting a decline of another two million subscriptions.
However, revenue is expected to continue to grow steadily by around ten percent and reach around USD 8 billion. Netflix expects profits to decline slightly, but the bottom line is still expected to increase by around USD 1.4 billion. Earnings per share are expected to be $3.
Netflix is working on “re-accelerating revenue growth”. To achieve this, the group wants to improve its service on the one hand. On the other hand, it also wants to work on “more effective monetization of shared use by multiple households”.