For the first time in a decade, Netflix said Tuesday, the streaming service lost more paying customers than it added after a net drop of 200,000 subscribers it attributed to its pullout from Russia.
Even though revenue grew, the announcement pushed its stock price down by more than 20 percent in after-hours trading. In a letter to shareholders, Netflix attributed the net loss in the January-March period to its decision last month to suspend services in Russia in protest of the Kremlin’s Feb. 24 invasion of Ukraine.
It lost 700,000 viewers in Russia, although it added 500,000 elsewhere globally.
The drop comes amid a larger trend of shrinking viewership, with the streaming service projecting that it will lose a further 2 million subscribers in the next three-month quarter ending in June.
It still said revenue would grow to almost $8 billion in that period, a 10 percent increase from the same time last year. The company also retains a paying audience of over 220 million, more than double what it had five years ago.
But the unexpected drop in paying viewers — the company had said in January it expected paying customers to increase by 2.5 million — reflects a steady slowdown in business. According to the company, increased competition and a slowing of pandemic-triggered growth among paying subscribers led more people to choose at-home entertainment.
To address the slump, Netflix said it would seek to monetize the millions of nonpaying viewers who have benefited from account sharing. The company estimates that 100 million households, including over 30 million in the United States and Canada, are sharing accounts.
“[Account sharing]’s not a new thing,” said Reed Hastings, Netflix co-chief executive, speaking to investors via video. He said, “We are working on ways to monetize sharing.” “Remember, these are 100 million households that already are choosing to view Netflix. They are passionate about the service. We just got to get paid.”
The company is experimenting with two paid sharing features in Chile, Costa Rica and Peru that are aimed at persuading existing account sharers to start paying small sums of up to $3.
Hastings also acknowledged robust competition. We have great competition. He said that they have some great films and shows, but did not name rivals. “What we got to do is take it up a notch.” In its letter, Netflix listed Disney Plus as one of the “traditional entertainment companies” to realize “streaming is the future.”
Over the long run, Netflix said it sees growth coming mostly from outside the United States. It will focus on producing content that “can be made anywhere and loved everywhere,” Netflix said, pointing to non-English-language hits produced outside the United States such as South Korea’s “Squid Game” and “All of Us Are Dead” and Spain’s “Money Heist.”
The company recorded $1.6 billion in net income during the January-March period, up from $607 million reported in the October-December 2021 quarter, but roughly a 6 percent drop from last year’s first quarter. Its revenue was nearly $7.9 billion, a 10 percent jump from the same period last year.