Netflix Share Prices Plunge as Subscribers Flee the Service En Masse

Streaming giant Netflix has just seen a mass hemorrhaging of its share prices, after reporting its first loss of subscribers in more than a decade.  

Shares in Netflix have slumped by 35%, wiping out USD$50 billion in the platform’s market value. This dismal performance was clearly reflected in the Trading Central sentiment index, which dropped to 0.6 in tandem with the plunge in Netflix prices.  

The decline in share prices was prompted by a shock exodus of paying customers since the start of 2022. Netflix shed 200,000 subscribers in the first quarter of 2022, in sharp contrast to its previous forecast of an increase of 2.5 million subscribers, as well as analyst forecasts of a 2.7 million rise.  

The company has diagnosed its problems as being an ongoing in nature and anticipates a further loss of around 2 million subscribers in the second quarter of 2022. This marks a sharp turn-around from the first year of the pandemic, with Netflix adding around 36 million subscribers in 2020  

The company itself said in a letter to shareholder that a number of factors may have fed into Netflix’s membership decline, including intensifying competition, the slowing adoption of smart TV’s, and macroeconomic trends. 

While Netflix was one of the first big adopters of the streaming services model, it now needs to contend against intensifying competition as new rivals enter or existing rivals step up their offerings.  

Some of these competitors are leading tech and entertainment companies with deep coffers, such as Apple, Amazon, Disney, Tencent and Youtube.  

They are already chipping away at Netflix, with the company’s US market share set to drop to 16% by 2026, from 25% at present, according to figures from GlobalData.  

Geopolitical turmoil has also made a dent in the Netflix membership base, with its withdrawal from Russia in response to the Ukraine war leading to a loss of around 700,000 subscribers.  

Netflix also estimates that more than 100 million households around the world are making use of the streaming service for free by sharing passwords, further undermining its revenues.  

Revenue and membership challenges may not be confined to Netflix alone, but could well be problems that affect the entire streaming industry. 

Despite possessing one of the biggest catalogues of pop culture properties on the planet, the Disney+ platform has seen a tripling in cancellation rates since the start of 2022 compared to the fourth quarter of last year.  

Disney+ has been forced to change tack in order to boost its fortunes, via the addition of a cheaper subscription model that includes advertising breaks.  

In spite of its membership woes and revenue challenges, Netflix remains strongly positioned in the market.  

Its base of paying customers exceeds 221 million viewers globally, while its revenues still managed to rise by around 10% in the first quarter to USD$7.87 billion, despite the decline in subscriptions during the period.  

Quarterly profits were just $1.6 billion however, as compared to $1.71 for the same period in 2021.  

Netflix also has the option boosting both membership and revenues by following the lead of Disney+ and incorporating advertisements into the platform for some viewers in exchange for reduced subscription fees. 

While Netflix co-CEO Reed Hastings said several years ago that there would never be advertisements on the platform, he shifts his stance in the letter that accompanied the company’s most recent report, stating that it “makes a lot of sense” to provide a lower-cost option to consumers that features advertising.  

Other leading streaming services, such as Hulu and Amazon Prime, have hosted ads on their platforms for years without any ill effect, while HBO Max commenced showing ads in the US summer yet did not suffer viewership declines.