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Netflix loses subscribers for the first time in over a decade, share price falls 20%

In its earnings report for the first quarter of 2022, Netflix informed shareholders that it has lost 200,000 subscribers in this period. This is the first time in over a decade that the streaming platform has lost subscribers.

A graphic of a Netflix icon on a dark background

The primary reasons for this negative trend include households canceling subscriptions to save money as streaming costs continuously increase, as well as the company's exit from Russia. Netflix has cautioned shareholders that subscriber counts may continue to drop but it plans to counter this problem soon by cracking down on password sharing. It estimates that over 100 million households are guilty of breaking its password sharing regulations and as such, stricter action will be taken in this area. Netflix CEO Reed Hastings is quoted as saying:

When we were growing fast, it wasn't a high priority to work on [account sharing]. And now we're working super hard on it.

Our relatively high household penetration - when including the large number of households sharing accounts - combined with competition, is creating revenue growth headwinds.

Netflix says that it lost 600,000 subscribers after exiting Russia and 700,000 other subscribers in U.S. and Canada quit after its latest price hike. It expects to lose two million more subscribers in the next quarter. Despite these apparent setbacks, Netflix continues to be the market leader in this space with over 220 million subscribers and says that these results are in line with its expectations and should yield higher revenue down the line.

Its revenue was up by 9.8% at $7.8 billion compared to the same period last year, but growth has slowed down considerably and profits are down by 6%. The latest quarterly earnings also resulted in the company's share price tanking by a significant 20% in after-hours trading.

Netflix has been trying to attract new subscribers and retain existing ones in multiple ways. It launched a gaming service at no extra cost last year and is now also exploring an ad-supported tier at a lower price point, even though its management had been strongly against this idea up until last month.

Source: Netflix via BBC

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