December 4, 2022

Netflix shares will sink as subscribers’ growth slows

Netflix Inc.

NFLX -1.48%

Said expecting to add Very small number The number of subscribers this quarter is more than it did a year ago, sharply reducing competition and prolonging disruption from the corona virus infection, drastically reducing the shares of the video streamer.

On Thursday the company forecast an increase of 2.5 million subscribers for the current quarter, up from four million a year earlier. It slightly missed its subscriber rating in the fourth quarter, adding 8.3 million subscribers instead of the planned 8.5 million.

Shares of Netflix fell 20% in hourly trading, while shares of its main streaming competitor,

Walt Disney Co.

Decreased by 3.4%.

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Despite a strong content lineup of movies and TV shows during the quarter, including new seasons such as “The Witcher” and “You”, Netflix’s subscriber Miss came. New films featuring political satire performed better.Do not look up, ”Which recently broke the company’s record for weekly visitors.

In Its letter to shareholders, Netflix said its subscriber growth rates were “not yet accelerated to pre-Govt levels”. The company said one of the reasons for this was the “current coward overhang” and economic problems in many parts of the world, including Latin America.

“Govt has introduced a lot of noise,” Reid Hastings, Netflix chairman and co-CEO, said in a video call to review the company’s results. He failed to grow subscribers, while co-CEO and head of content Ted Sarandos said the company did not see any decline in its involvement or retention of subscribers.

“All the basics are very solid,” Mr. Sarandos said.

However, Mr. Hastings did not live up to expectations last October as he predicted the end of the year for the company, with new shows coming back, including successful shows and the action-packed movie “Red Notice”.

“There’s a lot more content in Q4 than we have ever had,” he said. Hastings told investigators at the time.

The time travel-themed film “The Adam Project” starring Ryan Reynolds and Jennifer Garner and one of its biggest hits, “Bridgeton” is scheduled for March but low subscriber expectations for the first quarter have come.

The company said additional competition could also be a factor. In the past, Netflix has tended to reduce the competition it faces New streaming sites Disney’s Disney + and

AT&T Inc.

HBO Max.

In December, Disney + saw an improvement in downloads for processors thanks to releases such as “Hockey” and “The Book of Boba Fett”.

ViacomCBS Inc.

Paramount + with drops like “Clifford the Big Red Dog,” “Mayor of Kingstown” and “Yellowstone” preface “1883”, said UPS researcher John Hodlik.

Last week, Netflix Increased the price This is the first such incentive from the streaming platform since 2020, for its monthly programs in the US and Canada. Netflix did not raise prices worldwide. It Price reduction in India Last month it battled strong competition in a market that considers it critical to growth.

The company said programming costs were the main reason for the rise in prices.

Although Netflix always spends a lot of money on content, the growing streaming competition fills the market with new shows and movies. At the same time, Netflix is ​​canceling shows faster than ever. The makers working with Netflix said the new programs have a shorter window to prove themselves than in previous years.

Analysts forecast Netflix’s revenue for the quarter, up 16% to $ 7.71 billion. The company had quarterly earnings of $ 607.4 million, or $ 1.33 per share, compared to $ 542.2 million a year ago, or $ 1.19 per share. Analysts were targeting 83 cents a share.

The operating volume for the quarter was 8.2%, up from 14.4% a year earlier – due to the company’s expensive programming rankings in the previous three months.

Netflix said cash flow will be positive throughout 2022.

Netflix viewers have seen dubbed versions of the South Korean drama ‘Squid Game’ rather than subtitled versions. WSJ met with one of the show’s English language voice actors to see how dubbing foreign content contributes to the growth of the streaming company. Photo Description: Sharon Shi

The vast majority of new subscribers added 3.5 million subscribers in Europe, the Middle East and Africa. In the US and Canada, Netflix added 1.2 million, slightly higher than the same period a year ago.

Many analysts expect Netflix’s growth to come from international audiences in the coming year.

To attract new audiences, Netflix is ​​expected to spend more to create content in those markets. “This international growth will increase the pressure on the company to create more and more local content, and content costs continue to rise with the growth of subscribers,” said Michael Bacher, a researcher at Wedbush Securities.

In the United States, Netflix’s subscriber growth has slowed in recent years. Hostings said. He said getting two-thirds of the US pay-TV viewers who register on Netflix was less challenging than the remaining one-third doing so.

Mr. Hostings said some of those challenges were due to Netflix’s lack of live news and games. “If the company manages to land 80% of the US pay-TV market, it’s a good achievement,” he said.

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Write to Joe Flint at [email protected] and Kimberly Chin at [email protected]

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