For the first time in almost a decade, the number of Netflix customers has decreased.
According to the company’s announcement on Tuesday, the streaming service lost 200,000 customers in the first three months of the year.
The falls occurred when the company boosted pricing in major regions such as the United States and the United Kingdom while exiting Russia.
However, Netflix has warned that more losses are on the way, and it has signaled that as it rushes to sign up new subscribers, it will begin to tighten down on account sharing.
It is estimated that over 100 million homes are violating the regulations by sharing passwords.
“Working on [account sharing] wasn’t a top priority when we were growing fast,” stated CEO Reed Hastings. And now we’re putting in a lot of effort into it.”
According to the Bazzup, password sharing has been an issue for Netflix “for a long time,” according to Lucas Shaw, who runs the Screentime column for Bloomberg news.
“It appears like the corporation is attempting to locate a possible growth sector,” he told the Today show.
“They’ve tried and failed in the past to stop people from exchanging passwords.”
Subscribers are leaving.
Netflix cautioned in a letter to shareholders that a surge in sign-ups during the pandemic had “obscured the picture,” and that another two million users were likely to leave in the coming three months.
“As our results and forecast below illustrate, our sales growth has slowed significantly,” the business said.
“Competition, combined with our relatively high household penetration – when factoring the significant number of homes sharing accounts – is causing revenue growth hurdles.”
In October 2011, the company lost members for the first time in a quarter. It still has over 220 million subscribers worldwide.
Hit by the Russians
Netflix lost 700,000 members as a result of its decision to leave Russia following the Ukraine conflict, according to the company.
According to Netflix, another 600,000 people in the United States and Canada have canceled their subscriptions as a result of the price rise.
Despite the cancellations, Netflix stated the move was “in line with expectations” and will result in greater revenue.
The company’s sales increased 9.8% to more than $7.8 billion (£6 billion) in the first three months of this year compared to the same period last year.
Profits dropped more than 6% to $1.6 billion, indicating a downturn from previous quarters.
Sign-ups from other countries, such as Japan and India, helped to offset losses in the quarter.
As it seeks to expand, the company said it is concentrating on overseas markets and figuring out how to reach the estimated 100 million people who share household accounts, including more than 30 million in the United States and Canada.
Customers that share accounts with relatives or friends will be targeted for advertising and will generate income for the company.
Mr Hastings stated, “Those who have followed Netflix know that I’ve been against the complication of advertising and a huge fan of the simplicity of membership.” “However, as much as I support that, I am a larger supporter of consumer choice.”
Mr. Hastings stated that ad-supported services are “quite clear” for Disney and HBO.
However, economists claim that rising costs are beginning to put a strain on consumers.
According to research from market research firm Kantar, households in the UK cancelled more than 1.5 million streaming subscriptions in the first three months of the year, with 38 percent claiming they wanted to save money – the highest proportion ever.
Netflix is also up against a lot of competition, with companies like Amazon and Apple, as well as traditional media corporations like Disney, investing heavily in their online streaming services.
The loss of subscribers was a “reality check,” according to Paolo Pescatore, an analyst at PP Foresight, as the company strives to strike a balance between maintaining consumers and increasing income.
“While Netflix and other services were critical in the shutdown, people are now reconsidering their purchasing decisions based on changing habits,” he added.
He went on to say that North America is “today inundated with too many services chasing too little bucks.”
Following the revelation, the company’s stock dropped more than 20% in after-hours trading in New York, wiping more than $30 billion off its market value.
Shares of other entertainment companies, such as Disney, have also been impacted by investor fears.