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 * Netflix Inc


NETFLIX SHARES DROP 25% AFTER SERVICE LOSES 200K SUBSCRIBERS

By MICHAEL LIEDTKEtoday


FILE - This Aug. 13, 2020, photo shows a logo for Netflix on a remote control in
Portland, Ore. Netflix’s video streaming service suffered the first loss in
worldwide subscribers in its history, leading to a massive sell-off of its
shares. The company’s customer base fell by 200,000 subscribers during the
January-March period, according to a quarterly report released Tuesday, April
19, 2022; its stock dropped by 23% in after-market trading. (AP Photo/Jenny
Kane, file)

SAN FRANCISCO (AP) — Netflix suffered its first subscriber loss in more than a
decade, causing its shares to plunge 25% in extended trading amid concerns that
the pioneering streaming service may have already seen its best days.

The company’s customer base fell by 200,000 subscribers during the January-March
period, according to its quarterly earnings report released Tuesday. It’s the
first time that Netflix’s subscribers have fallen since the streaming service
became available throughout most of the world outside of China six years ago.
The drop this year stemmed in part from Netflix’s decision to withdraw from
Russia to protest the war against Ukraine, resulting in a loss of 700,000
subscribers.

Netflix acknowledged its problems are deep rooted by projecting a loss of
another 2 million subscribers during the April-June period.

If the stock drop extends into Wednesday’s regular trading session, Netflix
shares will have lost more than half of their value so far this year — wiping
out about $150 billion in shareholder wealth in less than four months.

ADVERTISEMENT


Netflix is hoping to reverse the tide by taking steps it has previously
resisted, including blocking the sharing of accounts and introducing a
lower-priced — and ad-supported — version of its service.


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FOR RUSSIAN DIPLOMATS, DISINFORMATION IS PART OF THE JOB

Aptus Capital Advisors analyst David Wagner said it’s now clear that Netflix is
grappling with an imposing challenge. “They are in no-(wo) man’s land,” Wagner
wrote in a research note Tuesday.

Netflix absorbed its biggest blow since losing 800,000 subscribers in 2011 — the
result of unveiled plans to begin charging separately for its then-nascent
streaming service, which had been bundled for free with its traditional
DVD-by-mail service. The customer backlash to that move elicited an apology from
Netflix CEO Reed Hastings for botching the execution of the spin-off.

The latest subscriber loss was far worse than a forecast by Netflix management
for a conservative gain of 2.5 million subscribers. The news deepens troubles
that have been mounting for the streaming since a surge of signups from a
captive audience during the pandemic began to slow.

It marks the fourth time in the last five quarters that Netflix’s subscriber
growth has fallen below the gains of the previous year, a malaise that has been
magnified by stiffening competition from well-funded rivals such as Apple and
Walt Disney.

The setback follows the company’s addition of 18.2 million subscribers in 2021,
its weakest annual growth since 2016. That contrasted with an increase of 36
million subscribers during 2020 when people were corralled at home and starved
for entertainment, which Netflix was able to quickly and easily provide with its
stockpile of original programming.

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Netflix has previously predicted that it will regain its momentum, but on
Tuesday faced up to the issues bogging it down. “COVID created a lot of noise on
how to read the situation,” Hastings said in a video conference reviewing the
latest numbers.

Among other things, Hastings confirmed Netflix will start crack down on the
sharing of subscriber passwords that has enabled multiple households to access
its service from a single account, with changes likely to roll out during the
next year or so.

The Los Gatos, California, company estimated that about 100 million households
worldwide are watching its service for free by using the account of a friend or
another family member, including 30 million in the U.S. and Canada. “”Those are
over 100 million households already are choosing to view Netflix,” Hastings
said. “They love the service. We’ve just got to get paid at some degree for
them.”

To stop the practice and prod more people to pay for their own accounts, Netflix
indicated it will expand a test introduced last month in Chile, Peru and Costa
Rica that allows subscribers to add up to two people living outside their
households to their accounts for an additional fee.

Netflix ended March with 221.6 million worldwide subscribers. The subscriber
downturn clipped Netflix’s finances in the first quarter when the company’s
profit fell 6% from last year to $1.6 billion, or $3.53 per share. Revenue
climbed 10% from last year to nearly $7.9 billion.

With the pandemic easing, people have been finding other things to do, and other
video streaming services are working hard to lure new viewers with their own
award-winning programming. Apple, for instance, held the exclusive streaming
rights to “CODA,” which eclipsed Netflix’s “Power of The Dog,” among other
movies, to win Best Picture at last month’s Academy Awards.

Escalating inflation over the past year has also squeezed household budgets,
leading more consumers to rein in their spending on discretionary items. Despite
that pressure, Netflix recently raised its prices in the U.S., where it has its
greatest household penetration — and where it’s had the most trouble finding
more subscribers. In the most recent quarter, Netflix lost 640,000 subscribers
in the U.S. and Canada, prompting management to point out that most of its
future growth will come in international markets.

Netflix also is trying to give people another reason to subscribe by adding
video games at no extra charge — a feature that began to roll out last year.

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