LOS ANGELES: Netflix said inflation, Ukraine war and fierce competition contributed to a loss of subscribers for the first time in more than a decade, marking an abrupt shift in fortune for a streaming company thriving during the pandemic.
The company said it lost 200,000 subscribers in its first quarter, falling well short of its forecast of adding 2.5 million subscribers. Suspending service in Russia after the Ukraine invasion took a toll, resulting in the loss of 700,000 members.
Wall Street sent Netflix’s stock tumbling 26% after the bell on Tuesday and erased about $40 billion of its stock market value. Since it warned in January of weak subscriber growth, the company has lost nearly half of its value.
The lagging subscriber growth is prompting Netflix to contemplate offering a lower-priced version of the service with advertising, citing the success of similar offerings from rivals HBO Max and Disney+.
“Those who have followed Netflix know that I’ve been against the complexity of advertising, and a big 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.”
Netflix offered a gloomy prediction for the spring quarter, forecasting it would lose 2 million subscribers, despite the return of such hotly anticipated series as “Stranger Things” and “Ozark” and the debut of the film “The Grey Man,” starring Chris Evans and Ryan Gosling.
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Netflix’s first-quarter revenue grew 10% to $7.87 billion, slightly below Wall Street’s forecasts. It reported per-share net earnings of $3.53, beating the Wall Street consensus of $2.89.
The company blamed its slowing growth on a number of factors such as the rate at which consumers adopt on-demand services, a growing number of competitors and a sluggish economy.
Account-sharing is a longstanding practice, though Netflix is exploring ways to derive revenue from the 100 million households watching Netflix through shared accounts, including 30 million in the United States and Canada.
As growth slows in mature markets like the United States, Netflix is increasingly focused on other parts of the world and investing in local-language content.
“While hundreds of millions of homes pay for Netflix, well over half of the world’s broadband homes don’t yet — representing huge future growth potential,” the company said in a statement.
