Netflix’s shares have tumbled more than 10 per cent today after the firm reported cooling growth in paid subscriptions that had spiked during lockdown.
Roughly 3.98 million people signed up for Netflix from January through March – four times down on the same period last year.
The firm has blamed delays in the production of TV shows and movies during the pandemic.
‘We believe paid membership growth slowed due to the big Covid-19 pull forward in 2020 and a lighter content slate in the first half of this year, due to Covid-19 production delays,’ executives said alongside the latest earnings release.
However, experts believe that the decrease in subscribers is likely due to a number of factors, including the easing of lockdown measures in both the UK and US, and the recent hike in subscription prices.
In January, Netflix users slammed the ‘greed’ of the streaming giant for hiking fees of its standard package from £8.99 to £9.99 per month, and its premium account from £11.99 to £13.99.
Uswitch.com’s streaming and TV expert, Nick Baker, said: ‘Netflix has been a lifeline for many people during lockdown, so this price rise is an unwanted extra expense for households feeling the financial pressure.’
He said the ‘chickens were coming home to roost’ for Netflix, with subscriber numbers growing more slowly as people come out of lockdown and watch less TV.
‘The next few years will be a battle to win each and every viewer,’ he added, in part due to increased competition from Disney and others, with ‘quality content’ a deciding factor.
Meanwhile, Netflix is scraping the barrel for content to entice subscribers to sign up, with few new films or TV programmes announced, aside from Prince Harry and Meghan’s new documentary.
However, the firm said they would spend more than $17 billion (£12.2 billion) on content for the platform over the next 12 months – three times the total BBC budget.
Shares in Netflix tumbled more than 10 per cent on Tuesday after the firm reported cooling growth in paid subscriptions that had spiked during lockdown.
Shares in Netflix tumbled 10 per cent on Tuesday after the firm reported cooling growth in paid subscriptions that had spiked during lockdown
Roughly 3.98 million people signed up for Netflix from January through March – significantly below the 6.25 million average projection of analysts surveyed by Refinitiv.
And Netflix estimates it will add just one million new streaming customers in the second quarter.
Analysts had expected a forecast of nearly 4.8 million.
In contrast to this year’s results, Netflix added 15.8 million new subscribers last year, many of who lived in Asia, where Netflix added 9.3 million new subscribers in 2020 – an increase of about 65 per cent over the previous year.
Netflix executives have previously cautioned that the pandemic likely fuelled a surge in subscriptions, with people who would have eventually signed up jumping on board sooner than they might have, skewing the results.
In the UK alone during lockdown studies revealed a massive boom in TV, including streaming content, viewing – up to five hours per day.
Ofcom said an ‘accelerated shift’ from TV channels to streaming services is likely to be one of the ‘most significant long-term impacts’ of the pandemic.
It found more than a third of adults ‘can see themselves no longer watching the main TV channels within the next three years’. This rose to more than half of those aged between 16 and 34.
The watchdog’s report said the ‘greatest growth’ during lockdown was enjoyed by streaming services, with existing subscribers watching more and ‘new users embracing [these] services for the first time’.
Netflix saw an overall increase in subscriber numbers over the course of the past year, but that rate of increase has started to slow down
Netflix subscriber figures, released as part of the latest earnings call, revealed the strongest growth in subscriber numbers was in Europe, which had some of the toughest lockdown measures during the first phase of the pandemic.
The streaming giant says it expects subscriber growth to accelerate anew later this year as it releases sequels to hit shows delayed by the pandemic.
‘We continue to anticipate a strong second half with the return of new seasons of some of our biggest hits and an exciting film lineup,’ the firm said.
This includes new seasons of ‘You,’ ‘Money Heist,’ ‘The Witcher’ and possibly ‘Bridgerton’ and action movie ‘Red Notice,’ among other titles.
Baker, from Uswitch, said he did expect Netflix to see a surge in new subscribers when all the delayed shows are available later this year, but competition will be harder, with Disney+ and others hot on their heels.
A shift from traditional television to streamed services remains a clear trend, according to the company, who face tough competition from the likes of Disney including its new Star brand, Amazon and traditional broadcasters.
The firm blamed delays in the production of TV shows and movies during the pandemic for the fact just four million new subscribers signed up early in 2021
Europe saw some of the largest growth in user numbers over the course of lockdown, possibly due to the tighter restrictions compared to other regions
Subscribers in the US and Canada saw among the lowest growth in the first quarter of this year
‘More and more new streaming services are launching, reinforcing our vision that linear TV will slowly give way to streaming entertainment,’ Netflix said.
‘We’re working as hard as ever to continually improve our service so that we are the best entertainment option available.’
Analysts project people will spend less time streaming from their living rooms as Covid-19 vaccinations spread and more people emerge from their homes.
Rival media companies have declared streaming their priority and are spending billions to compete with Netflix.
Netflix breaks down subscriber numbers into four regions: US, Europe, Latin America and Asia Pacific. The Latin America region has seen a levelling off in growth
Disney+ crossed 100 million subscribers in March, while Netflix’s total streaming customers stood at 207.6 million at the end of that month.
Netflix’s share of new US subscribers fell to 8.5 per cent during the quarter, down from 16.2 per cent the same period a year ago, according to Kantar Media.
During the quarter, Netflix lost one of its most popular titles when workplace comedy ‘The Office’ moved to Comcast Corp streaming service Peacock in the US.
Netflix also raised its monthly rates in Britain, Germany, Argentina and Japan during the quarter.
Netflix does benefit from an award-winning lineup of shows that include still-popular series such as ‘Stranger Things,’ ‘The Crown,’ and ‘Ozark.’
This is alongside more potential hits always brewing in a video factory that plans to spend $17 billion (£12 billion) on programming this year alone – four times the total BBC budget.
Shares of Netflix sunk 11 per cent in after-hours trading to $489.28, wiping $25 billion off the company’s market capitalisation.
Its stock has risen 27 per cent over the past 12 months compared with a 63 per cent increase in the tech-heavy Nasdaq Composite Index.
The cooling is a ‘sign that the world is coming back to more normal at the expense of Netflix,’ tweeted Gene Munster of the investment firm Loup Ventures, adding that ‘we think the long-term growth is flattish’ for the streaming giant.
‘What wasn’t expected was the strength of the slowdown in international markets, where competition is significantly lower,’ said eMarketer analyst Eric Haggstrom.
Subscriber growth in the Asia Pacific region has been steady over the past year with a spike due to coronavirus lockdown early in 2020
Netflix hasn’t done much to make itself popular with existing subscribers, including price hikes and moves to restrict password sharing, a popular practice among families.
Netflix is testing a feature that asks viewers to verify that they share a household with the account holder, the company said on Thursday, a move that could lead to a clampdown on sharing of passwords.
A small number of Netflix users are receiving a message asking them to confirm they live with the account owner by entering details from a text message or email sent to the owner.
‘If you don’t live with the owner of this account, you need your own account to keep watching,’ the message says.