Netflix Wobbles, Shares Crash 18%
Has Netflix finally peaked, with new data revealing that the US streaming Company lost 200,000 subscribers after predicting growth of 2.5M subscribers, the shock news saw their shares fall 18% overnight?
New research reveals a big issue that Netflix and streaming services such as Stan, Foxtel and Amazon Prime are facing is that Generation Z consumers are turning to gaming over watching TV shows and movies.
The latest Digital Media Trends survey from Deloitte, released in late March, revealed that Generation Z, those consumers ages 14 to 25, spend more time playing games than watching movies or television series at home, or even listening to music.
Also impacting Netflix is their decision to suspend service in Russia after it invaded Ukraine, this resulted in the loss of an additional 700,000 subscribers.
The stock plunged 18% in after-market trading after the Company reported that they could lose an additional 2 million subscribers in the next quarter.
Netflix currently has 221.6 million subscribers and the last time they reported a fall was in October 2011.
“Our revenue growth has slowed considerably,” Netflix acknowledged in its letter to shareholders.
“Covid clouded the picture by significantly increasing our growth in 2020, leading us to believe that most of our slowing growth in 2021 was due to the Covid pull forward.”
Netflix like local streaming services is facing a slew of challenges, 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.
First-quarter revenue grew 10% to US$7.87 billion, slightly below Wall Street’s forecasts of $7.93 billion. It reported per-share net earnings of $3.53.
Observers claim that the slowdown in signups is reflective of a more competitive streaming landscape with Netflix now having to contend with more rival services than ever before, each vying for consumer eyeballs and attention.
The competition is also getting cheaper, with Disney Plus announcing plans to offer a lower-cost, ad-sponsored service later this year. So, it’s no surprise that Netflix’s growth has become more incremental in recent years claims one analyst.
Another issue for Netflix is that a lot of homes share accounts.
“The large number of households sharing accounts — combined with competition, is creating revenue growth headwinds” the Company said.
Netflix now estimates that as many as 100 million households are using the service via shared passwords. “It’s harder to grow membership in many markets,” as a result of the situation, Netflix said.
Currently Netflix is increasingly focused on International markets with the business investing in local language content resulting in Australian Netflix subscribers getting access to Swedish, Danish, and French subtitled content.
Netflix has been able to increase subscription prices in Australia, the USA United and the UK which is helping to fund content production and growth in other parts of the world, such as Asia the Company said.