Netflix lost 200,000 subscribers in the first quarter of this year — its first subscriber drop in a decade — and expects to lose 2 million more in the three months from April to June, the company said Tuesday.
In its first-quarter earnings report, Netflix said Russia’s war in Ukraine and subsequent sanctions affected membership numbers. It also cited password-sharing in multiple households and other factors as impacting its bottom line.
“It’s increasingly clear that the pace of growth into our underlying addressable market (broadband homes) is partly dependent on factors we don’t directly control, like the uptake of connected TVs, the adoption of on-demand entertainment and data costs,” the company said in a statement. “We believe these factors will keep improving over time, so that all broadband households will be potential Netflix customers.”
The streaming service saw subscriber numbers drop from 221.84 million to 221.64 million from January through March. It had previously predicted it would add 2.5 million subscribers in the period.
The company also said it’s focusing on how to best monetize account-sharing accounts beyond single households. In the letter to shareholders, the company admitted account sharing likely helped fuel its growth. But it estimates that in addition to its 222 million paid users, Netflix is being shared with roughly 100 million additional households, including 30 million in the US and Canada.
“Account sharing as a percentage of our paying membership hasn’t changed much over the years, but, coupled with the first factor, means it’s harder to grow membership in many markets — an issue that was obscured by our COVID growth,” the letter said. “While we won’t be able to monetize all of it right now, we believe it’s a large short- to mid-term opportunity.”
After it enjoyed surges in popularity early in the pandemic from people stuck at home and desperate for entertainment, Netflix’s subscriber growth has been volatile for more than a year. The company even lost members in the US and Canada — its biggest single market — during one quarter last year for the first time since 2019.
Netflix has also faced a wave of competition from new rivals like Disney Plus and HBO Max, as media and tech giants have launched their own services to take on Netflix as television transitions to a future of streaming. Netflix’s rare subscriber loss in the US and Canada hinted that the new competition, which is centered in the US, may be pressuring Netflix’s membership growth there.
Shares of Netflix fell 25% in after-hours trading. Through the close, Netflix stock has dropped 40% since the beginning of the year.
Overall, Netflix reported a profit of $1.6 billion, or $3.53 per share, compared with $1.7 billion, or $3.75 cents a share, a year earlier. Revenue rose 10% percent to $7.87 billion.
Analysts on average expected per-share profit of $2.90 — bullish compared with Netflix’s guidance of $2.86 — and $7.93 billion in revenue. Looking ahead, Netflix also predicts $3 per share in earnings in the second quarter. On average, Wall Street analysts who track Netflix expected $3.
Correction, 3:41 p.m. PT: An earlier version of this story contained incorrect figures describing Netflix’s drop in customers. The streaming service said that from January through March, subscriber numbers fell from 221.84 million to 221.64 million.