Netflix lost 200,000 subscribers in a quarter, set to introduce cheaper ad-supported plans, account sharing fees

In what turned out to be the complete opposite of what had been expected, Netflix announced a net loss of 200,000 subscribers in a single quarter. That’s not only short of the 2.5 million additional subscribers it predicted, but it’s a complete reversal of fortune for the streaming giant. The shares descended on the spiral, falling as much as 26%, with a market value of $40 billion wiped out.

In other numbers reported for the first quarter of 2022, Netflix’s Q1 revenue grown up 10% to $7.87 billion, slightly below Wall Street forecasts. It reported net earnings per share of $3.53, beating the Wall Street consensus of $2.89. But the loss of subscribers and a bleak news outlook for the current quarter sent its shares plummeting nearly 26%, wiping out nearly $40 billion in market capitalization.

The majority of the loss is largely due to the suspension of service in Russia. This resulted in the immediate loss of almost 700,000 subscribers to the service. Additionally, Netflix predicted another loss of almost 2 million subscribers, despite the return of “Stranger Things”, “Ozark” and many other popular titles.

All of this prompted the company, which has steered clear of ads for almost 25 years, to think about introducing ads into an otherwise clean and prodigious Netflix user interface. “Those who have followed Netflix will know that I have been against the complexity of advertising and a huge fan of the simplicity of subscription,” said Netflix CEO Reed Hastings. “But, as much as I’m a fan of that, I’m a bigger fan of consumer choice.”

“Allowing consumers who want lower prices and who are ad-tolerant to get what they want makes a lot of sense,” he said, adding that the ad-supported model is not really a “short-term fix”. Viewers who wish to go ad-free will continue to be offered premium packages.

Almost every other major streaming service has ad-supported plans. Amazon’s Prime Video and Disney’s Disney+ (including Hostar in Asia) are all ad-supported. This and shifting market sentiment have often challenged Netflix’s strategy of going ad-free.

Netflix has also been under pressure due to competition grabbing several lucrative live sports rights, which Netflix has not taken seriously so far. Add to that, Google’s Youtube and Facebook to the mix, and the lucrative live sports streaming segment has already become hotly contested, further hampering Netflix’s entry into the same. Take for example the Indian Premier League or IPL. The world’s biggest cricket league, which had 338 million viewers in its final season, would sell its next round of rights for almost $5 billion – among the biggest in the history of any sports league, ever . These rights have not been a priority for Netflix, taking away lucrative sources of subscription revenue.

Another big culprit is account sharing. Netflix has often overlooked this practice, which, while leading to lost revenue, has often retained its loyal subscription base. But now it looks like Netflix is ​​exploring ways to earn revenue from the 100 million households that watch Netflix through shared accounts, including 30 million in the US and Canada.

“When we were growing rapidly, that wasn’t a priority to work on,” Hastings said of account sharing in remarks during Netflix’s investor video. “And now we are working very hard on it.”

Netflix lost 200,000 subscribers in a quarter, set to introduce cheaper ad-supported plans, account sharing fees

Source link Netflix lost 200,000 subscribers in a quarter, set to introduce cheaper ad-supported plans, account sharing fees

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