What's going on?
Netflix reported worse-than-expected results late on Tuesday, as the streaming giant discovers how getting canceled really feels.
What does this mean?
Investors were expecting Netflix to report another quarter of slowing subscriber growth, but the results turned out even worse than they’d thought. Netflix lost 200,000 subscribers last quarter, with three of the four regions it covers reporting falls – marking the first time in over ten years that it has actually lost customers. The streaming giant said its higher subscription prices might’ve put some viewers off, and thinks its withdrawal from Russia cost it 700,000 customers too. But it looks like it could get worse still, with the company expecting to lose another 2 million subscribers this quarter as well. And since investors use subscriber growth as a measure of future profitability, they didn’t take that as a good sign: they initially sent its stock plunging 25%.
Why should I care?
The bigger picture: Streamers are the first to go.
It’s no wonder Netflix is struggling to add new viewers, let alone keep its old ones: data out over the weekend showed that UK households canceled streaming subscriptions in record numbers last quarter, with 25% more cancellations than the same time last year. That comes as consumers around the world cut back on life’s little luxuries to cope with rising prices – a decision that’s been made all the more imperative by streamers’ rising prices. Throw in more choice of streaming services than ever, and Netflix is facing an uphill battle.
Zooming out: Advertise here.
One way analysts reckon Netflix can make up for that non-existent subscriber growth is by selling advertising on its platform – like HBO Max already does and Disney+ is planning to do. In fact, they think Netflix could make as much as $3 billion in extra revenue if it follows suit. And since the strategy wouldn’t cost much to roll out, a substantial portion of that would go straight to the streaming giant’s bottom line.