Netflix shares fell on 25% due to the outflow of subscribers

Акции Netflix обвалились на 25% из-за оттока подписчиков

NetflixNFLX259.90 $BuyService in partnership with Tinkoff Investments. Quotes are updated every 15 minutes

19 April Netflix reported for the first quarter of 2022. For the first time in 10 For the years, the company reported a reduction in the audience. According to her forecasts, in the current quarter, another 2 million people will unsubscribe from the service.

Further without Russia

500,000 new users signed up for Netflix in the first quarter. But in March, the company left Russia and lost 700 thousand subscribers on this.. As a result, the net outflow for the quarter amounted to 200 thousand people.. The last time Netflix lost subscribers was in 2011..

The company previously expected 2.5 million first-quarter user growth., and analysts - by 2.7 million people.

Net subscriber churn occurred in almost all regions, that is, it is not only in Russia. Most in the US and Canada. This is an important region for Netflix, because this is where the service gets the most revenue per user - about 15 $.

Netflix predicts, net churn of subscribers in the current, the second quarter will be 2 million, and the total audience will be reduced from 222 to 220 million.

Акции Netflix обвалились на 25% из-за оттока подписчиков

Operating results at the end of the first quarter

Users Net inflow Revenue per user
USA and Canada 74,6 million −0.6 million 14,9 $
Europe, Middle East and Africa 73,7 million −0.3 million 11,6 $
Latin America 39,6 million −0.4 million 8,4 $
Asian-Pacific area 33,7 million +1,1 million 9,2 $

Sales growth slowed

Here's how Netflix's financial results have changed compared to the first quarter of 2021, and here's what analysts expected:

  • revenue — 7.87 billion dollars (+9,8%), expectations - 7.93 billion dollars;
  • earnings per share - 3,53 $ (−5,9%), expectations - 2,89 $.

Due to the outflow of subscribers, Netflix's quarterly revenue fell short of experts' expectations and grew weakly. According to company forecasts, in the second quarter, sales will increase by about the same 9,7%. The last time Netflix's revenue grew by less than 10% was in 2012..

Акции Netflix обвалились на 25% из-за оттока подписчиков

Salvation in advertising

According to Netflix, The audience of the service is declining for several reasons.. Here are the key ones.

Wide penetration. The company has passed the stage of active growth, and now she has nowhere to expand. Pandemic delays stagnation, but now people are returning to having fun outside the home.

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Many competitors. The company has to fight for the viewer's attention not only with traditional cable TV, but also with other streaming platforms. While Netflix's share of total viewing volume is on the rise, It just doesn't lead to audience growth..

Expensive Subscription. Rising prices around the world have not bypassed the entertainment industry. To reduce the cost of producing new content, Netflix is forced to raise prices. So, in January, a subscription to each of the tariffs is basic, standard and premium - in the USA and Canada it has risen in price by 1-2 $. It is for this reason that 600,000 net users unsubscribed from the service in the first quarter..

Unscrupulous subscribers. The company has about 220 million users, but, according to Netflix, 100 million more people use the service. This means, that about one in three watches movies and series for free. Previously, the audience of the service grew rapidly, and Netflix remained loyal to users, who share accounts with relatives and friends. Now the company has to fight this type of piracy..

For a long time, Netflix has been against ads on its platform.. But during the report, the head of the company said, that the service is "open" to advertisers. Cheaper tariff with ads may be launched within two years.

Theoretically affordable subscription will help Netflix solve each of the key problems. For example, entice some of the subscribers from other sites and stop the outflow of their own. It will also help monetize users, who take an account from a friend, because they'll watch the ads anyway.

But whether this approach will work in practice is unknown.. Possible recession, product shortages due to supply disruptions and similar reasons are already forcing advertisers to cut budgets. In this case, Netflix will be able to return to double-digit sales growth only in a few years..

Promotions: worse, than in 2020

After the post-market report, NFLX shares fell by 25%, to 260 $. Shares of other streaming services have also fallen in price.: Warner Bros. Discovery — на 3%, Disney - on 4%, Of the year - на 6%.

Back in February, Netflix shares lost their two-year gains., that happened due to quarantine. From its maximum 700 $ they have already fallen 60%. Now papers are even cheaper, than during the crash in March 2020. They were the cheapest back then. 16 March - around 300 $.

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Акции Netflix обвалились на 25% из-за оттока подписчиков

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