SAN FRANCISCO –
Netflix lost nearly 1 million subscribers in the spring amid tougher competition and skyrocketing inflation that is straining household budgets, adding to the urgency behind the streaming video service’s push to launch a cheaper option. with business interruptions.
The contraction of 970,000 accounts between April and June, announced Tuesday as part of Netflix’s second-quarter earnings report, is by far the largest quarterly loss in subscribers in the company’s 25-year history. However, it could have been much worse, considering that Netflix management published an April forecast that indicated a loss of 2 million subscribers during the second quarter.
The less severe loss of subscribers, combined with a prospect of a return to growth in the July-September period. helped lift battered Netflix shares 7% in extended trading after the numbers came out.
Netflix’s April-to-June regression follows a loss of 200,000 subscribers for the first three months of the year, marking the first time Netflix’s subscriber total has dropped in consecutive quarters since it began its transition from offering DVD rentals. by mail to streaming video 15 years ago. .
The loss of nearly 1.2 million subscribers during the first half of this year also offers an early contrast to the pandemic-fueled growth Netflix enjoyed during the first half of 2020 when its streaming service gained nearly 26 million subscribers.
Despite the recession, Netflix still earned $1.4 billion, or $3.20 per share during the quarter, a 6% increase from the same period last year. Revenue rose 9% from the same period last year to nearly $8 billion.
Netflix ended June with 220.7 million subscribers worldwide. far more than any of its new competitors, such as Walt Disney Co. and Apple. And in a sign of hope, Netflix management has predicted that its service will add around 1 million subscribers during the July-September period, indicating that the worst of its slump may be over.
Although Netflix’s spring subscriber losses weren’t as bad as investors and management feared, the recession served as a grim reminder of the challenges now facing the Los Gatos, California-based company after a decade of unbridled growth. .
Netflix’s stock price has plunged nearly 70% so far this year, wiping out about $180 billion in shareholder wealth. Since then, other streaming video services have made great strides in attracting viewers, with Apple winning praise for its award-winning lineup of TV series and movies, while Disney’s popular lineup of family titles continues to gain traction.
At the same time, Netflix has been raising its prices to help pay for its own original programming, just as the highest inflation rates in 40 years have prompted consumers to cut spending on discretionary items like entertainment.
Such factors help explain Netflix’s April announcement that it will crack down on the rampant sharing of subscriber passwords and take another step it once despised by offering a less expensive tier of its service that will include business interruptions. Without providing further details, Netflix said Tuesday that both the ad-supported plan and crackdown on password sharing will begin early next year. The company did not say how much the streaming option with commercials will cost.
Netflix took another step toward creating the ad-supported option last week when it announced it would partner with Microsoft to deliver the commercials.