San Francisco (AP): An unexpectedly sharp drop in subscribers has Netflix considering changes to its service that it has long resisted: Minimizing password sharing and creating a low-cost subscription supported by advertising.
The looming changes announced late Tuesday are designed to help Netflix regain momentum it’s lost over the past year. Pandemic-driven lockdowns that drove binge-watching have lifted while deep-pocketed rivals such as Apple and Walt Disney began to chip away at its vast audience with their own streaming services.
Netflix’s customer base fell by 200,000 subscribers during the January-March quarter, the first contraction it’s seen since the streaming service became available throughout most of the world outside of China six years ago. The drop stemmed in part from Netflix’s decision to withdraw from Russia to protest the war against Ukraine, resulting in a loss of 700,000 subscribers. Netflix projected a loss of another 2 million subscribers in the current April-June quarter.
The erosion, coming off a year of progressively slower growth, has rattled another key constituency for Netflix _ its shareholders. After revealing its disappointing performance, Netflix shares plunged by more than 25% in extended trading. If the stock drop extends into Wednesday’s regular trading session, Netflix shares will have lost more than half of their value so far this year _ wiping out about $150 billion in shareholder wealth in less than four months.
Aptus Capital Advisors analyst David Wagner said it’s now clear that Netflix is grappling with an imposing challenge. “They are in no-(wo) man’s land,’’ Wagner wrote in a research note Tuesday.
The Los Gatos, California, company estimated that about 100 million households worldwide are watching its service for free by using the account of a friend or another family member, including 30 million in the U.S. and Canada. “’’Those are over 100 million households already are choosing to view Netflix,’’ Hastings said. “We’ve just got to get paid at some degree for them.’’
By Michael Liedtke
