Due to lagging subscriber growth, Netflix is considering offering a lower-cost version of the service with advertising.
Netflix Inc reported a loss of subscribers for the first time in more than a decade. Blaming inflation, the Ukraine war, fierce competition. And forecasting further losses in the future, signaling an abrupt shift in fortunes for a streaming company that thrived during the pandemic.
The company lost 200,000 subscribers in the first quarter, falling far short of its target of adding 2.5 million subscribers. In addition, suspension of service in Russia following the invasion of Ukraine took a toll. Resulting in the loss of 700,000 members.
Netflix’s stock dropped 26 percent after the bell on Tuesday, wiping out roughly $40 billion in market value. Since announcing weak subscriber growth in January, the company’s value has dropped by nearly half.
Due to lagging subscriber growth, Netflix is considering offering a lower-priced version of the service with advertising, citing the success of rivals HBO Max and Disney+.
“Those who have followed Netflix know that I’ve been a big fan of the simplicity of subscription. And a big opponent of the complexity of advertising,” said Netflix CEO Reed Hastings. “However, I prefer consumer choice as much as I like that.”
Netflix forecasted a 2 million subscriber loss in the spring quarter, despite the return of such highly anticipated series as “Stranger Things” and “Ozark. As well as the debut of the film “The Grey Man,” starring Chris Evans and Ryan Gosling.
According to Refinitiv data, Wall Street expected 227 million in the second quarter.
The downturn affected other video streaming-related stocks, with Roku falling more than 6%, Walt Disney falling 5%, and Warner Bros Discovery falling 3.5%.
Hastings told investors that the pandemic had “created a lot of noise,” making it difficult to interpret the company’s subscription business’s surge and ebb over the last two years.