Image: © Ryan/Stock.adobe.com
Slowing subscriber growth and underwhelming expectations for the next quarter caused shares to plunge 20pc.
Netflix said it is experiencing a slowdown in subscriber additions and gave a weak forecast for the first quarter of 2022 in its latest earnings report.
The Squid Game and Red Notice maker reported revenue of $7.71bn for fourth quarter of 2021, in what is usually the busiest time of the year for streaming giant. This marks a 16pc increase in revenue over the same period in 2020.
Netflix added 8.28m net paid subscribers to its platform in a quarter that saw the release of Don’t Look Up and a new season of Emily in Paris. This missed its own expectation of 8.5m subscribers – the same amount it added in the fourth quarter of 2020 – and brings total global paid memberships to nearly 222m.
The slowdown in subscription growth and a weak 2.5m net adds forecast for the first quarter this year has underwhelmed shareholders. CNBC reported that Netflix shares dropped 20pc after its earnings report was published yesterday (20 January).
The 2.5m forecast for early this year is a result of “a more back-end weighted content slate” with big potential hits such as season two of Bridgerton – one of the most watched Netflix shows – and original film The Adam Project due to release in March.
Growth in subscriber numbers has not gone back to pre-pandemic levels, according to Netflix, because of “the ongoing Covid overhang and macroeconomic hardship” in many parts of the world such as Latin America. Rising competition in the streaming market, with newer players such as Disney+, has also likely played a role.
The company has been looking to Asia to drive new subscribers. The APAC region has seen strong subscriber growth, especially in Japan and India, with 2.6m additions in the latest quarter.
However, the strong dollar is costing Netflix in Asian markets, where revenue per membership is lower than the US and Europe regions. “The thing that frustrates us is why we haven’t been more successful in India,” said Reed Hastings, chief executive of Netflix, on the earnings call.
In October, Netflix said that because of the popularity of shows such as Squid Game, Money Heist, Lupin and The Crown, it will focus on more international content to increase its subscriber base. It also looked to woo new users in Africa with a free plan in Kenya.
Netflix has also been making a play for the gaming industry in recent months. “In 2022, we’ll expand our portfolio of games across both casual and core gaming genres as we continue to program a breadth of game types to learn what our members enjoy most,” the company wrote in a letter to shareholders.
Don’t miss out on the knowledge you need to succeed. Sign up for the Daily Brief, Silicon Republic’s digest of need-to-know sci-tech news.
