On Tuesday, the most popular streaming platform in the world, Netflix released its first quarter results. The platform reported a loss of 200,000 subscribers. It also projected a loss of more than 2 million subscribers in the second quarter. This is the first time the streaming platform has faced a dip in subscribers, in over a decade. The share price fell by more than 25 percent immediately after the release of the report.
The first quarter’s financial results of Netflix provided some cheer in earnings but lost in revenue as per estimates by Wall Street analysts. According to data from Refinitiv, the forecast was $2.89 earnings per share (EPS) on a revenue of $7.93 billion. Netflix reported EPS of $3.53 on revenue of $7.868 billion.
Netflix also reported $1.97 billion as operating income with an operating margin of 25.1 percent. Net cash used in operating activities was $923 million while free cash flow was $802 million. The net income for the first quarter was $1.6 billion.
The streaming giant blamed four broad reasons for its loss in subscribers.
Its underlying market depends on factors partly out of the company’s control such as uptake of connected TVs as well as the popularity of on-demand entertainment. Data costs also affected streaming platforms.
The sharing of Netflix passwords in millions; outside households. The streaming platform has begun tackling the issue of sharing a single Netflix password to many users.
Increased competition from linear TV as well as other platforms named by them which included YouTube, Amazon, Hulu as well as new streaming services.
Factors, termed as macro factors by the streaming company, such as slow economic growth, rising inflation, Russia’s invasion of Ukraine and continued disruptions due to COVID-19. Incidentally, it reported that its decision to suspend Netflix subscriptions in Russia cost the company; as it lost 700,000 subscribers.
Gen Z and Millennial customers reportedly spend more time on gaming rather than listening to music or watching TV, or movies. They also watch more user generated content on platforms like TikTok and YouTube. Netflix has begun investing in gaming to catch up with this trend but it has not, as yet, had a financial impact on the streaming platform’s traditional revenue.
