On Tuesday, Streaming services giant Netflix lost 200,000 subscribers in the first quarter of 2022. This marks the company’s first decline in more than a decade, which is a surprising feat by itself.
As a result, the share prices of the streaming company fell by 25% during yesterday’s trading session.
Netflix Lost 200,000 Subscribers
For the first quarter of 2022, Netflix lost 200,000 subscribers instead of gaining a projected 2.5 million new customers. The last time the company reported a decline in users was last October 2011.
As a result, the company issued a more pessimistic outlook for the second quarter: it anticipates a loss of two million more subscribers.
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This is despite the new seasons of bankable hits such as “Stranger Things” and “Ozark”. Wall Street forecast 227 million subscribers for the second quarter. However, the company’s adjusted guidance means that it will shrink its base from 221.6 million customers to 219 million.
Additionally, the company’s first-quarter revenue grew 10% to $7.87 billion. However, this is slightly below analysts’ estimates of $7.93 billion. The company’s earnings per share ended up at $3.53.
Stiffer Competition in Streaming Services As Companies Spent More for Content
Even as Netflix remains the dominant streaming service company worldwide, it faces stiff competition from a growing number of competitors. It now has to contend with offerings from Hulu, Disney, HBO, and Amazon.
Last year also marked the era of big spenders for content. To attract new customers or keep existing ones, Streaming companies spent a total of $50 billion on new content.
This is according to Ampere Analysis. That sum is about 50% more than what they paid in 2019 for new content. This only means that as 2022 approaches its midpoint, the streaming wars are now in full swing.
As Netflix Lost 200,000 Subscribers, It Blamed Password Sharing Is The Culprit
Curiously, Netflix also blamed password sharing as a major cause for its loss of subscribers. = “The large number of households sharing accounts — combined with competition, is creating revenue growth headwinds.
The big COVID boost to streaming obscured the picture until recently,” Netflix said. As a result, the company will now seriously push to limit accounts to a single household.
Reportedly, the company will charge additional fees for accounts that log in from multiple locations.
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In fact, password sharing also made it more difficult for Netflix to sign up new customers. It added that hundreds of millions of households pay for Netflix.
However, over half of the world’s homes powered by broadband internet don’t have Netflix yet. This represents future growth prospects for the company.
Netflix Faces Major Headwinds
The company already jacked up subscription prices in major markets such as the US, the UK, and Ireland.
Wedbush analyst Michael Pachter noted that this allowed it to bankroll more content aimed at emerging markets such as Asia. However, subscription prices in these growth areas are substantially lower.
In addition, the uncertainty surrounding the world’s economy in 2022 can further complicate matters. Netflix’s ability to increase its membership and raise prices face challenges as inflation rises and competition amplifies.
Newer Generations Want More Than Streaming Services
Additionally, newer generations seem to prefer other forms of entertainment over streaming videos.
Deloitte’s latest Digital Media Trends survey showed that consumers aged 14 to 25 prefer playing video games to watching videos or listening to music.
In addition, their preference for videos centers on user-created short content like TikTok or YouTube shorts.
Watch the Bloomberg Markets & Finance news video reporting that Netflix lost 200,000 subscribers, its first decline in a decade:
What do you think of Netflix’s loss of subscribers for the first quarter of 2022? Is this a forthcoming trend as people grow tired of streaming services? Also, will restricting password sharing help Netflix regain lost revenue?
Let us know what you think. Share your comments below.