Netflix Shares Fall More Than 7 Percent After Data Shows Continued Losses of Long-Term Subscribers

The logo of the Netflix streaming service provider in Paris on Sept.15, 2014. (Gonzalo Fuentes/Reuters)

Shares of Netflix fell more than 7 percent on May 18 after new data showed the streaming giant is losing long-term subscribers.

The streaming giant, based in Los Gatos, California, said in April 2022 that it had lost 200,000 subscribers globally in the first three months of the year and warned investors that it expects to lose 2 million more global subscribers by July.

At the time, Netflix pinned the loss of subscribers on “macroeconomic weakness” and changes to its prices, as well as the “COVID pull forward” and its decision to suspend its service in Russia in the wake of the Moscow-led invasion of Ukraine, which it said resulted in a loss of 700,000 subscribers.

However, new data published by research firm Antenna showed that Netflix appears to be rapidly losing long-term subscribers, with consumers who had been Netflix subscribers for more than three years accounting for 13 percent of total cancelations in the first quarter of 2022, according to a report from The Information. This is up from 5 percent at the start of 2022.

Meanwhile, new subscribers accounted for just 60 percent of cancellations in the first quarter, down from 64 percent in the fourth quarter of 2021, according to Antenna data.

Overall in the first quarter of 2022, cancellations rose to 3.6 million people, up from about 2.5 million in the first quarter of 2021.

A second study by data science company Parrot Analytics, as reported by Insider, showed that consumer demand for original Netflix content had plateaued over the past year.

“As demand for Netflix originals and the entire catalog continues to fall domestically and globally while demand for originals on other services grows, Netflix has to refocus its content strategy to extract the most value from every series ordered,” Parrot Analytics said in its quarterly streaming report.

Netflix shares have fallen 47 percent since the company released its earnings report on April 19.

As of May 20, shares have rebounded slightly and are trading at $186.02.

The data comes as roughly 150 Netflix employees were laid off on May 17 in the United States, as the streaming giant battles with slowing growth.

The layoffs represent approximately 2 percent of Netflix’s workforce in the United States and Canada.

“These changes are primarily driven by business needs rather than individual performance, which makes them especially tough as none of us want to say goodbye to such great colleagues,” the company said in a statement. “We’re working hard to support them through this very difficult transition.”

In April, Netflix said it ended the quarter with roughly 222 million subscribers and vowed to boost growth by improving the quality of its content.

The company said its plan is to “reaccelerate our viewing and revenue growth by continuing to improve all aspects of Netflix—in particular, the quality of our programming and recommendations, which is what our members value most.”

“On the content side, we’re doubling down on story development and creative excellence,” Netflix said in its earnings letter.

Elsewhere last month, Netflix co-founder and co-CEO Reed Hastings said the company is considering offering lower prices to customers with advertising, something that multiple other competitors are doing but that Netflix has previously been against.

“Allowing consumers who would like to have a lower price and are advertising-tolerant get what they want, makes a lot of sense,” Reed said during the April earnings call.

Netflix is currently being sued by shareholders who purchased stock between October 19, 2021, and April 19, 2022, who claim that the company misled the market and failed to disclose that its growth was slowing amid increased competition, and also that it was losing subscribers on a net basis.

The lawsuit was filed in federal court in San Francisco by a Texas-based investment trust seeking damages for declines in Netflix’s share price after the company missed its subscriber growth estimates.