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Netflix share drops almost 20%, amid weak subscribers
Netflix's global paid streaming memberships missed analysts' expectations.

Netflix, which announced quarterly earnings on Thursday, now has 222 million subscribers worldwide.

Image: nytimes.com

Netflix reported fourth-quarter earnings after the bell on Thursday. The streamer beat on both the top and bottom lines, but shares plunged more than 20% in after-hours trading, to the lowest levels since June 2020, on slowing subscriber growth.

The company’s earnings release prompted the stock to drop nearly 20 percent in after-hours trading. For the first quarter of this year, Netflix forecast an additional 2.5 million subscribers, down from the four million it added during the same quarter of 2021. That would be one of the streaming giant’s slowest opening quarters in years.

The world’s largest streaming service added 8.3 million customers from October to December. When it released a heavy lineup of new programming including the star-studded movies Red Notice and Don’t Look Up and a new season of The Witcher.

The number of subscribers added in the fourth quarter was slightly off the 8.5 million that Netflix had forecast. But the 1.2 million added from the United States and Canada region reflected its strongest quarter there since the beginning of the pandemic. Most of the growth came outside the United States, as has been the case for the last few quarters.

NFLX Global Paid Streaming Memberships

Netflix’s global paid streaming memberships rose 8.9% YOY, the second slowest pace of growth in at least 14 quarters.12 Global paid streaming memberships represent the number of global users that have signed up and paid for a subscription to receive streaming services.

A core feature of Netflix’s strategy is to grow its streaming membership business globally, as it is the company’s main source of revenue.6 Netflix recently surpassed the 200 million mark in total global paid streaming memberships at the end of FY 2020.

Netflix is also investing in other types of streaming entertainment, such as video games, to attract subscribers. The company said that its mobile games on Android and iOS debuted globally in November. This allows members to access games from within the Netflix mobile app. It plans to continue expanding its game portfolio in 2022.

Netflix announced price increases in the U.S. and Canada last week. In the United States, the monthly cost for the basic plan rose from $1 to $9.99. The standard plan jumped from $13.99 to $15.49 and the premium plan rose from $17.99 to $19.99.

Netflix’s strategy is to increase prices as customers become even more entrenched in the company’s exclusive content. Price increases can help offset waning customer growth.

Netflix also updated investors on its push into gaming. The company has been releasing games based on its popular titles to its subscribers. The new games may help it gain insight into which characters are most popular, which could eventually help shape its content.

Stock Movement

Shares of Netflix plummeted nearly 20% to $408.13 in after-hours trading. Competitor Walt Disney Co, which has staked its future on building a strong streaming business, saw its shares sink 4%. Streaming device Roku Inc fell 5%.

Nasdaq futures dropped almost 1%, showing traders expect the tech-heavy index to open lower on Friday.

 

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