Netflix loses 200,000 subs, revenue growth tumbles in Q1 | Major Businesses | Business | News | Rapid TV News
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In what could be the canary in the coalmine warning of troubled times ahead for the sector, SVOD leader Netflix has shocked the industry with first quarter results showing revenue growth slowed considerably, a collapse in subscribers and rocketing password sharing.
Netflix office LA 20 Jan 2021
For the first quarter of its financial year ended 31 March 2022, Netflix posted revenues of $i7.868 billion, up 9.8% on an annual basis driven said the company by an 8% year-on-year increase in average streaming paid memberships and 2% year-on-year growth in average revenue per membership. Operating income of $1.972 billion was above the company’s forecast of $1.8 billion due to lower than projected content expense, and net income amounted to $1.597 billion.

Yet the bad new came with subscriptions. Paid net additions for the quarter were down 200,000 compared with guidance forecast of increases of 2.5 million and 4.0 million in the same quarter a year ago. The suspension of Netflix’s service in Russia and winding-down of all Russian paid memberships resulted in a 700,000 impact on paid net adds and excluding this impact, Netflix said paid net additions would have totalled 500,000.

Focussing on key regions, the results showed that in EMEA as a whole, paid nets adds fell by 300,000 and figure that would have been an increase of 400,000 excluding the Russia impact. Netflix saw a slowdown in business in Central and Eastern Europe in March, coinciding with Russia’s invasion of Ukraine. In Latin America, total paid net additions fell by 400,000, driven by a combination of forces including macroeconomic weakness and our price changes that were a drag on membership growth.

United States and Canada paid net adds were down 600,000 largely as a result said Netflix of a price change which it said was tracking in-line with expectations and which was significantly revenue positive. Netflix claimed that it was making good progress in APAC where it was seeing “nice” growth in a variety of markets including Japan, India, Philippines, Thailand and Taiwan.

Yet the company recognised that in general its main challenge for membership growth is continued soft acquisition across all regions. Retention was also slightly lower relative to guidance forecast, although it remained at what the company regarded as a very healthy level, indeed, “among the best in the industry”. The company added that recent price changes were largely tracking in-line with expectations and remain significantly revenue positive.

Moreover though, Netflix conceded that in the near term it was not growing revenue as fast as it would like and that the slowdown was not just the case of pull forward of Covid-related growth in 2020.

It said there were four key dynamics at play: the pace of growth into its underlying addressable market was partly dependent on factors it did not directly control, like the uptake of connected TVs, the adoption of on-demand entertainment, and data costs; password sharing which it said was taking place in 100 million households in addition to its total base of 222 million customers; competition for viewing with linear TV as well as YouTube, Amazon, and Hulu; macro factors, including sluggish economic growth, increasing inflation, geopolitical events such as Russia’s invasion of Ukraine, and some continued disruption from Covid.

The first quarter results statement concluded with a guidance warning of Q2 net paid adds being down by 2 million compared with up by 1.5 million a year earlier. The forecast assumes current trends such as slow acquisition and the near-term impact of price changes persist and typical seasonality. However, revenue is expected to be up 10% year-on-year in Q2.