why Netflix could cost more

The streaming service, whose number of subscribers skyrocketed during confinement, is looking for ways to make up for its unprecedented loss of 200,000 subscribers worldwide.

After years of conquering high-speed users, streaming giant Netflix lost 200,000 subscribers worldwide during the first quarter compared to the end of 2021, the first in more than a decade. And he hopes to lose even more in the spring.

The news caused shares to fall 25% on Tuesday, April 19 during electronic trading after the close of the New York Stock Exchange.

To restore the situation, the pioneer of the sector aims above all to tighten the screw on the side of the sharing of identifiers and passwords, which allow many people not to pay to access the platform.

And invest more and more in content production so as not to give up too much ground to competition, such as Disney +, which has been a success since its launch in late 2019.

“It simply came to our notice then [la perte d’abonnés] it is disappointing for our investors, and it is disappointing, of course, however […] we are committed to achieving these goals and returning to their good graces, ”company co-founder Reed Hastings said in a call to the analyst.

Netflix has had inflated figures during the Covid-19 pandemic. The market was expecting a correction, but not as strong.

The pioneer in the sector had planned to gain an additional 2.5 million subscribers – and analysts expected even more – but, on the contrary, it lost, reaching 221.64 million subscriptions.

This drop was partly caused by the suspension of service in Russia, which resulted in a net loss of 700,000 subscriptions. “Without that impact, we would have had an additional 500,000 subscriptions,” compared to last quarter, Netflix said in its earnings statement.

No more sharing your free account

Netflix estimates that more than 100 million households do not pay for subscriptions. “We just have to make sure they pay at least in part for the service they love,” Reed Hastings said.

In early March, the group launched tests in South American countries to charge its customers for adding additional profiles to their account. The platform plans to install this system in its main markets within a year.

“We’re not trying to stop people from sharing, but we’re going to ask you to pay a little more to do that,” said Greg Peters, chief operating officer.

The company does not want to affect another measure, known as “engagement”, that is, the time users spend watching movies and series.

On the other hand, “we’re doing very well,” said CEO Ted Sarandos, referring to a hit film and series: “You have to have an ‘Adam Project’ and a ‘Bridgerton’ every month because service always lives up to expectations.

“Its transmission market share remains incredibly high, which puts the company in a good position to fight the competition,” notes Robert Cantwell of Upholdings.

In the U.S., Netflix attracts 73.8% of video-on-demand service users, second behind YouTube (95.8%) and ahead of Amazon (63.8%), according to eMarketer.

But big tech companies like Amazon and Apple can “broadcast their content at a loss,” says Robert Cantwell.

Pubs and video games

In total, Netflix earned $ 7.9 billion in revenue from January to March, almost 10% more than a year ago, thanks in part to a one-year increase in subscribers (+ 6.7%) and increase in their prices.

But the company saw its net profit fall to $ 1.6 billion from $ 1.7 billion in the first quarter of 2021.

It now plans to offer cheaper subscriptions, with advertising, in a year or two.

“It definitely works for Hulu,” Reed Hastings said. “If you want the option without ads, this will always be possible. If you prefer to pay less and are tolerant of ads, there will also be an offer for you.”

To diversify its sources of revenue, Netflix has also entered the lucrative video game market. In September, the company bought its first video game studio, Night School Studio, a California start-up. And in November, it released several mobile games for its subscribers, including some inspired by the universe of the sci-fi and horror series “Stranger Things.”

The CFO also announced that spending growth should be slowed down, both in terms of content and other budgets.

Victoria Beurnez with AFP

Leave a Comment