Netflix Had a Rough Q1

The answer to that question👆 is increasingly becoming “no.” Yesterday, Netflix reported a loss of 200,000 subscribers during the first quarter, its first decline in paid users in more than a decade. Shares were down more than 25% in extended trading following the news.

• The company previously told shareholders it expected to add 2.5 million net subscribers in Q1. Analysts had predicted it would be closer to 2.7 million.

🤔 Why the big miss?... In its quarterly shareholder letter, Netflix cited the Russia/Ukraine conflict, increasing competition/inflation, and password sharing.

• Russia/Ukraine: The company wound down its service in Russia after the invasion, resulting in a loss of 700,000 paid subscribers.
• Increasing competition/inflation: Mo’ services means mo’ problems. 35% of Americans have canceled a monthly subscription in the past six months due to inflation, according to a recent CNBC survey.
• Password sharing: Netflix currently has 222 million subscribers – and in addition to that, the company estimates more than 100 million additional households are able to access its service through a shared password.

👀 Looking ahead… Netflix is forecasting a global paid subscriber loss of 2 million for the second quarter, which may be why the company hinted a global password crackdown may be coming. And CEO Reed Hastings said yesterday that Netflix is now “open” to lower-priced, ad-supported tiers after years of resistance.