TV and film streaming service Netflix saw its shares tumble by nearly 20 per cent after it warned subscriber growth would slow substantially.
The world’s largest streamer said it just added just 2.5 million subscribers in the first three months of this year, far fewer than the 4 million it added this time in 2021 and well below expert expectations.
Worryingly for the streamer, the slowdown in subscriber growth comes even as Netflix has assembled one of the strongest catalogues of original content since its launch, including the hit show Squid Game and Don’t Look Up, starring Leonardo DiCaprio Jennifer Lawrence and Meryl Streep.
Netflix said increasing rivalry between streaming services including DisneyPlus and HBO Max and others “may be affecting our marginal growth some”.
Rivals are pouring billions of dollars into creating new programmes to challenge Netflix.
Its total number of paying subscribers increased by just 18 million in the course of 2021 compared to 37 million in 2020, according to filings on the US Securities and Exchange Commission (SEC). That brought the total number of paying customers to almost 222 million.
There are growing fears that the huge numbers who signed up to watch its content during the 2020 lockdowns are now returning to more regular routines just as the companies are spending billions of dollars on new shows to attract and retain viewers.
Netflix said the amount it was spending had squeezed its profits to 8 per cent in the last three months of 2021 – down from 14 compared with a year earlier.
Netflix noted that “competition… has only intensified over the last 24 months as entertainment companies all around the world develop their own streaming offering”.
The company acknowledged the increased rivalry “may be affecting our marginal growth” but said it continues to grow in every country in which its competitors have launched.
Joint chief executive Reed Hastings, expressed frustration as the share sell-off wiped out a fifth of Netflix’s value, said: “For now, we’re just like staying calm and trying to figure (it) out.”
Netflix also pointed out that some of its heralded content had been late arriving in its schedules including a second season of Bridgerton and the The Adam Project starring Ryan Reynolds.
Netflix said it believed the ongoing pandemic and economic hardships had “created a lot of bumpiness” but the company’s business model was “solid.”
Netflix last week raised prices in the US and Canada, its most popular markets.
Despite the subscriber slowdown, the company is prospering. Netflix earned $667m (£490m). Its revenue rose in the three months to Christmas rose by 16 per cent to $7.7bn (5.6bn)..
“Even in a world of uncertainty and increasing competition, we’re optimistic about our long-term growth prospects as streaming supplants linear entertainment around the world,” Netflix said.
Executives sought to reassure investors the company’s long-term prospects were bright. Co-chief executive Ted Sarandos predicted the switch to streaming from traditional television would continue to open opportunities worldwide.
“The pace of the migration may be a little hard to call from time to time when there are kind of very global events or even local conditions,” Sarandos said, “But it’s absolutely happening. There’s no question of that.”
