Netflix loses another two million subscribers over the next three months

Why did Netflix stock drop? Netflix says it expects to lose another two million subscribers over the next three months, sending its shares into freefall.

Shares in streaming service Netflix have fallen sharply in trading today (April 20th), after the company announced a drop in subscribers during the first quarter of the year. The company expects to lose millions more users over the coming months.

CNBC reports that Netflix stocks slumped by 37 per cent after announcing its first-quarter results. The service saw rapid growth in its subscriber base during the coronavirus pandemic, with people largely confined to their homes during lockdown.

However, the end of Covid restrictions and increased competition have put Netflix under increasing pressure. Some households are also cutting back on their streaming subscriptions as the rising cost of living begins to bite.

Why did Netflix stock drop?

Netflix stocks slumped on Wednesday after the company announced that it had lost 200,000 subscribers during the first three months of 2022. It expects to lose another two million between April and June.

Consumers are spending less time watching streaming services now that lockdown restrictions have ended, while the burgeoning cost of living crisis is also causing households to reconsider their financial priorities.

In addition, Netflix pulled out of Russia after the invasion of Ukraine. It has also raised prices in key markets including the United States and the UK.

The company’s chief executive, Reed Hastings, told shareholders that Netflix would clamp down on password sharing. It estimates that more than 100 million households are sharing Netflix passwords, depriving the firm of revenue. Netflix is also preparing to offer a cheaper, ad-supported subscription rate alongside its ad-free model. Reed Hastings said the new subscription would be rolled out “over the next couple of years”.

Netflix has canceled a number of new shows – after its subscriber numbers took a hit last week. As a result of the loss, the streaming giant has canceled a series of projects.

Roald Dahl’s The Twits, Jeff Smith’s comic book series Bone, and Lauren Faust’s Toil and Trouble have all been removed. Bright 2, set to feature Will Smith, has also been an ace. Phil Rynda, Netflix’s Director of Creative Leadership and Development for Original Animation, has also been fired.

Netflix’s subscriber base fell by 200,000 subscribers during the January-March quarter, the first contraction since the streaming service became available across most of the world six years ago. The disappointing performance caused Netflix’s share price to plunge 23% in extended trading.

Freetrade’s Paul Allison said the predicted drop in users was “a worrying sign … at a time when the company is raising prices overall to generate enough cash flow (which is currently negative) to sustain an entertaining series of shows”. Reed Hastings, co-founder and chairman of Netflix, has long opposed introducing ads to the service but could make moves to add another revenue stream.

It has also been reported that Netflix may crack down on password sharing to ensure they maximize their current consumer base. Popular TV shows on the platform include Bridgerton, Stranger Things, and Squid Game.