Netflix shares drop 25% after losing 200K subscribers

Netflix suffered its first subscriber loss in more than a decade, causing its shares to plunge 25% in extended trading amid concerns that the pioneering streaming service may have already seen its best days.

The company’s customer base fell by 200,000 subscribers during the January-March period, according to its quarterly earnings report released Tuesday It’s the first time that Netflix’s subscribers have fallen since the streaming service became available throughout most of the world outside of China six years ago. The drop this year stemmed in part from Netflix’s decision to withdraw from Russia to protest the war against Ukraine, resulting in a loss of 700,000 subscribers.

Netflix acknowledged its problems are deep rooted by projecting a loss of another 2 million subscribers during the April-June period.

If the stock drop extends into Wednesday’s regular trading session, Netflix shares will have lost more than half of their value so far this year — wiping out about $150 billion in shareholder wealth in less than four months.

Netflix is hoping to reverse the tide by taking steps it has previously resisted, including blocking the sharing of accounts and introducing a lower-priced — and ad-supported — version of its service.

Aptus Capital Advisors analyst David Wagner said it’s now clear that Netflix is grappling with an imposing challenge. “They are in no-(wo) man’s land,” Wagner wrote in a research note Tuesday.

Netflix absorbed its biggest blow since losing 800,000 subscribers in 2011 — the result of unveiled plans to begin charging separately for its then-nascent streaming service, which had been bundled for free with its traditional DVD-by-mail service. The customer backlash to that move elicited an apology from Netflix CEO Reed Hastings for botching the execution of the spin-off.

The latest subscriber loss was far worse than a forecast by Netflix management for a conservative gain of 2.5 million subscribers. The news deepens troubles that have been mounting for the streaming since a surge of signups from a captive audience during the pandemic began to slow.

It marks the fourth time in the last five quarters that Netflix’s subscriber growth has fallen below the gains of the previous year, a malaise that has been magnified by stiffening competition from well-funded rivals such as Apple and Walt Disney.

The setback follows the company’s addition of 18.2 million subscribers in 2021, its weakest annual growth since 2016. That contrasted with an increase of 36 million subscribers during 2020 when people were corralled at home and starved for entertainment, which Netflix was able to quickly and easily provide with its stockpile of original programming.