Netflix Expects Tough Year After Subscriber Loss

Netflix Expects Tough Year After Subscriber Loss
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2022 didn't start as planned for Netflix. The streaming service didn't meet its estimates on the number of subscribers as new disruptions caused viewers to cancel the service.

Netflix blames saturation in its biggest markets, increased competition, and macro-factors including continued disruption of COVID-19 and the war in Ukraine. The company ended the quarter with 221.6 million global subscribers, up year-on-year but shy of its expectation for net additions of 2.5 million in the period. Suspension of Netflix services in Russia due to the country’s invasion of Ukraine was a big factor, resulting in a loss of 700,000 subscribers: it lost around 600,000 subscribers in Canada and the US due to price rises.

Compared with Q1 2021, subscribers grew by 4 million. The recent drop will no doubt be a concern for the company. Netflix forecasts further woes for the current quarter, with another 2 million subscribers expected to leave the streaming service. To improve the situation, Netflix stated it would put the focus on programming, while co-CEO Reed Hastings said it will also launch an advert-supported service and seek to generate revenue from password sharing.

Revenue in Q1 totaled $7.9 billion, up from $7.2 billion in 1Q021, with net income dropping slightly to $1.6 billion from $1.7 billion. In an earnings statement, Netflix explained the subscriber boost it received due to the pandemic had obscured the picture until recently and it was now feeling the effects. Indeed, following a growth boom in 2020, there were signs its momentum was slowing in 2021. Netflix also noted its high household penetration when including the number of home-sharing accounts, and rising competition from rival streaming services including Disney, Amazon, and YouTube were all creating revenue headwinds.