Netflix shares plunged 37% in extended hours after a report that showed that the streaming company lost 200,000 subscribers in the first quarter. It’s the first decline in paid users in more than 10 years.
Other streaming stocks, Spotify, Disney, and Roku also plunged in the after-hours market. Netflix is forecasting a loss of 2 million more subscribers in the second quarter. The last time Netflix lost subscribers was October 2011.
“Our revenue growth has slowed considerably,” the company wrote in a letter to shareholders Tuesday. “Streaming is winning over linear, as we predicted, and Netflix titles are very popular globally. However, our relatively high household penetration — when including the large number of households sharing accounts — combined with competition, is creating revenue growth headwinds.”
Co-CEO Reed Hastings said the company is “open” to lower-priced, ad-supported tiers in an effort to bring more subscribers to the streaming platform.
“Our revenue growth has slowed considerably as our results and forecast below show. Streaming is winning over linear, as we predicted, and Netflix titles are very popular globally. However, our relatively high household penetration – when including the large number of households sharing accounts – combined with competition, is creating revenue growth headwinds. The big COVID boost to streaming obscured the picture until recently. While we work to reaccelerate our revenue growth – through improvements to our service and more effective monetization of multi-household sharing – we’ll be holding our operating margin at around 20%.” The company said in a letter to shareholders.
“Key to our success has been our ability to create amazing entertainment from all around the world, present it in highly personalized ways, and win more viewing than our competitors. These are Netflix’s core strengths and competitive advantages. Together with our strong profitability, we believe we have the foundation from which we can both significantly improve, and better monetize our service long term.” The letter continued.