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A scene from “Bridgerton”, produced by Netflix
The value of Netflix shares plunged 35 percent following it revealed a sharp decline in the number of subscribers and warned that millions more were regarding to terminate their subscriptions.
The decline in the value of shares led to the loss of Netflix more than 50 billion dollars from the market value of the company, while experts warned that it faces major challenges to return to its previous path.
Netflix is facing stiff competition from other streaming platforms and services, and has also been hit following it raised prices and suspended its service in Russia.
But some are skeptical regarding its plans to boost growth, which include offering a free, ad-supported service.
Netflix also plans to stop users from sharing their account passwords, and estimates that more than 100 million families enjoy the platform’s services without paying subscription fees.
In a sign of the jitters, William Ackman, one of the most popular investors in the United States, abandoned his $1.1 billion investment in Netflix on Wednesday, losing more than $400 million.
His hedge fund had bought the shares just three months ago.
In a brief statement, Ackman said that while Netflix’s plans to change its business model make sense, investing in the company appears risky.
“While Netflix’s work is easy to understand, in light of recent events, we have lost confidence in our ability to predict the company’s future prospects with sufficient certainty,” he said.
In a trade update on Tuesday, Netflix said its total subscriber count fell by 200,000 in the first three months of 2022, well short of its target.
It also said that regarding two million more people are likely to leave the service in the three months to July.
Some analysts have warned that following a period of massive expansion during the pandemic, the online broadcasting giant has run out of avenues of growth.
Some consumers are trying to dispense with streaming services to reduce costs, while some feel that there are plenty of other options amid the avalanche of competing streaming services such as Disney and Amazon.
“Netflix’s broader problem, with other companies in the sector, is that consumers don’t have unlimited money, and one or two subscriptions is usually enough,” said Michael Hewson, analyst at CMC Markets.
picture released, Netflix
A scene from the series “The Crown”, produced by Netflix
“Once you get past that, you have to give something up in the cost-of-living crisis, and while Netflix is still a market leader it doesn’t have the big money like Apple, Amazon and Disney, which makes it more vulnerable to marginal pressure,” he added.
But Julian Aquilina, chief television analyst at media research firm Enders Analysis, said it was a mistake to lose faith in Netflix.
“The streaming market is maturing and people’s high expectations for Netflix are being reshaped,” he said.
“But I think she will continue to be the market leader, she has such a leadership position. If people are going to drop a subscription, Netflix will not be the first thing they choose.”
He added that the company had just raised its prices, “which always leads to a lower number of subscribers, but also means that it generates more revenue from each customer.”
Netflix remains the world’s leading streaming service with more than 220 million subscribers. Netflix is increasingly producing its own content, and hit series such as “The Crown”, “Bridgerton” and “The Squid Game” have become international hits.
The company has enjoyed uninterrupted quarterly growth in subscribers since October 2011, but on Tuesday admitted it was losing customers to competitors as it struggled to expand due to password-sharing.
She also said that the decision to raise prices in major markets cost her 600,000 subscribers in North America alone, while her exit from Russia due to the invasion of Ukraine lost 700,000 subscribers.
Despite the challenges, revenue grew by $7.8 billion in the first three months of the year, up 9.8 percent over the same period last year.
This was a slowdown from previous quarters, while earnings fell more than 6 percent to nearly $1.6 billion.
