Friday, Apr 22, 2022, 16:46 Economy

Netflix Reports Abrupt Decline – Discusses Problems Facing The Company

When a company's paper value falls 25% within the span of a few minutes, things have clearly progressed beyond the point of a simple mishap – instead, something has clearly happened to disrupt the confidence of investors in the company's product or service to such a degree. This was exactly the case with Netflix during after-hours exchanges 2 days ago. In one single blow, Netflix stock plummeted. During the height of the coronavirus pandemic and whilst many individuals were quarantined in their houses or apartments, Netflix took advantage of the situation and profiteered a large number of new subscribers. Although some investors might have hoped for slightly more growth, the number of subscribers still increased substantially and Netflix found itself achieving record numbers. Now, however, things have made a 180 degree turn towards a crash course and the current prognosis looks grim.

First Net Loss In 10 Years
At its quarterly conference, Netflix revealed to investors that it had just lost 600,000 subscribers in the USA and Canada after a recent increase to the streaming service's price. Another 700,000 subscribers in Russia were forced out as Netflix restricted the country's access to its platform following its internationally condemned invasion of Ukraine. Although the company was able to attract some customers from other markets, it still witnessed a net loss of 200,000 viewers. Compared to this year's goal, an 2.5 million increase in subscribers, the result is both disastrous and the streaming giant's first step backwards in over 10 years.

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Netflix's Statement & Worse News
There are currently 221.6 million active Netflix subscribers in total. One explanation that the company has provided for the recent dip is account sharing and Netflix alleges that there are currently 100 million households using Netflix without paying. For those who already think that a loss of 200,000 subscribers is bad enough, the current prognosis is even worse: a dip in subscribers totaling up to 2 million more over the next 3 months. One measure which Netflix plans to introduce to recoup lost revenue involves taking on the problem of password sharing via an additional fee. There are also talks of introducing a cheap advertising tariff and improvements to user content recommendations as well as more specialized production for individual national markets to hold onto current customers.

Sales & Profit
Last quarter's sales numbers show a somewhat less pessimistic picture for the company. With US$7.9 billion dollars in sales, there was an increase of 9.8%, although the actual profit did shrink from US$1.7 to 1.6 billion dollars. For comparison: In the first quarter of 2020, before the initiation of lockdowns in most countries, Netflix's sales numbers lay at around US$5.8 billion, with a profit of .7 billion dollars. During that same time frame, there was also a considerable increase in production costs – rising from US$450 million to US$660 million per quarter. Netflix always cited the latter following increases to the streaming service's price.

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