Netflix shares fall to a record low after subscriber password sharing crackdown
The streaming platform hit its all-time low share prices once they took serious motive to crack down on password sharing. Netflix has changed the game on people's media consumption and had tremendous growth year over year. Within the first three months of the year, the streaming service saw 200,000 users decline.
As the sharp decline in shares continued, the company shared new plans. Netflix plans to sign up new members with an advertisement-based subscription. The households using Netflix subscriptions used a single account to stream media among family members. In some third world countries, it is exploited in great numbers.
Online services utilise currency conversion, and based on its value, the product's price fluctuates. Netflix account sharing gave people the option to use the platform without giving up too much money. It was going great; the platform had a few blockbusters last year and kept the revenue margin growing. The firm to shareholders said, "our revenue growth has slowed considerably." Along with that, "high household penetration – when including a large number of households haring accounts – combined with competition, is creating r revenue growth headwinds."
The platform was estimated to add another 2.5 million subscribers, but it was off considerably. The loss of 200,000 subscribers in a single quarter brought down stock price and company growth chart. It also clearly warned investors that the platform may lose another two million subscribers in the second quarter.
Netflix is the world's largest streaming service and has business in almost all the counties with the internet. On Tuesday, a decade-long run of subscriber growth was supposed to receive estimates via the company's success.
But recent plan to crackdown password sharing brought it to another level. Especially in the US and Canada, it is "harder to grow membership." Analyst at Moffett Nathanson, Michael Nathanson, said, "we have witnessed a company go from a growth darling to growth purgatory instantly." If we review the chart, it seems the company is not as invincible as we think—good news for competitors.
The streaming giant had a different stat. They estimate that around 100 million households use their services free via password sharing. Boss Reed Hastings said this is a practice that "you have to learn to live with." Mr Hasting on Tuesday said they had to make efforts to attract new customers. Of which a percentage will become paid subscribers. It is how the business on the internet is done, not the other way around.
Netflix is testing out password sharing plan in Latin America and could be rolled out in other countries soon. Users might be able to add two different profiles for $2-$3 each month on top of the regular fee. They are looking for a "customer-centric" solution to adapt to changes.
The Russia Ukraine conflict had its toll on Netflix too. The firm lost around 700,000 people who used its services from Russia. Once the subscription price rose in January, it lost another 600,000 users in the US and Canada. The basic plan increased from $9 to $10 per month and the standard $14 to $15.5 each month.
Co-chief executive Ted Sarandos said, "We're feeling higher levels of market penetration, and heightened competition," Light Shed Partners analyst Rich Greenfield said the company "is not resonating relative to the spend level. Netflix should be creating significantly more must-see TV series movies that become ongoing franchises." One or two blockbusters a year is not enough anymore as uncountable media companies are waiting to get a piece of the pied.
$17 billion a year for content is not enough for the economy Netflix created for itself. Disney, Paramount and Warner Bros, Apple TV, and Discovery spent billions to reach the category Netflix arrived in the shortest time. These companies are expected to spend $100 billion this year to make content to attract paying subscribers.