Fewer subscribers
Disappointing Forecast: Netflix Stock Plunges
Netflix missed its subscriber target – on the stock market, this had a negative impact on the streaming company’s stock
© Robyn Beck / AFP
Netflix missed its target: At the end of last year, the streaming service had almost 222 million subscribers – fewer than targeted. This caused the share price to plummet. Netflix also fears a disappointing increase in subscribers for the current quarter.
Shares in US streaming portal Netflix plummeted after the company reported disappointing numbers. According to its own statements on Thursday, the streaming service had 221.8 million subscribers at the end of 2021, which was slightly below its own target. For the first quarter of 2022, the company also expected a disappointing increase of only 2.5 million subscribers. The shares of the Californian entertainment group lost around 20 percent in after-hours trading.
Netflix was a big beneficiary of the exit restrictions during the corona pandemic and was able to gain a significant number of customers. But those days seem to be over for now: The last time Netflix only expected growth of 2.5 million subscribers within three months was in 2010 – when the service only had 13.9 million subscribers.
Strong competition in the streaming market
In the fourth quarter of 2021, the streaming service was able to gain 8.3 million subscriptions. The company reported net income of $607 million on sales of $7.7 billion for October through December.
“Subscriber retention and audiences remain strong, but new subscriber growth has not returned to pre-pandemic levels,” Netflix acknowledged. Netflix explained the weak figures on the one hand with a “persistent Covid overhang” and on the other hand with “macroeconomic difficulties in some parts of the world, particularly in Latin America”. Netflix also argued that it faces stiff streaming competition from providers like HBO Max and Disney+, which “could hurt our slow growth a bit.”
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Inflation concerns are having an impact on Netflix
The analysts at Parrot Analytics saw the competition between the streaming giants as the main reason for the top dog’s low growth. “Apple TV+, Disney+ and HBO Max are responsible for virtually all of Netflix’s losses in global demand for original content over the past two years,” they said, warning: “The world’s leading streamer faces fiercer competition in 2022 than ever before .”
While Netflix’s market share was 50 percent in 2018, eMarketer forecasts that it will drop to 28 percent by 2023.
Independent analyst Rob Enderle added that markets are already a bit nervous at the moment due to inflation concerns and geopolitical tensions with China and Russia. Also, due to high inflation, people in the US tried to cut costs. “If people are struggling to afford gas and groceries, it’s going to be hard for them to justify another streaming service,” he added. Netflix announced price increases in the US last Friday.
Netflix costs increased
Last year, Netflix benefited from the worldwide success of the South Korean series “Squid Game”, which had been viewed by more than 142 million subscribers (about two-thirds of the users) by mid-October, a month after its release. Netflix confirmed there will be a second season, but didn’t give an exact timeline. Meanwhile, fans will have to wait until March to see the second season of the popular series Bridgerton.
Meanwhile, Netflix’s costs have continued to rise as the company invests in shows and marketing to fend off competition.