Netflix investors have been worried that the company isn’t adding subscribers fast enough — and today, they started to panic. After Netflix reported lower than projected subscriber additions for the final quarter of 2021, its stock plummeted nearly 20 percent.
The plunge was the lowest the stock had dropped since June of 2020, CNBC noted. Last quarter, Netflix had forecasted that it would report 222.06 million paid subscriptions by the end of last year. Instead, the company reported Thursday that it ended the fourth quarter with 221.84 paid memberships.
It’s a small difference, but investors have been worried about Netflix — already one of the biggest streaming companies out there — being able to find new ways to keep growing. And by Netflix’s own estimates, subscriber growth is going to be low next quarter as well. The company estimated that it would add 2.5 million subscribers in the first quarter of 2022, down from 4 million during the same period last year.
That all said, plenty of people are still coming to and paying for Netflix. Revenue grew 16 percent year over year, and paid memberships rose 9 percent year over year. But while Netflix is still growing, it’s doing so incrementally. Both subscriber and revenue growth have been pain points for anxious investors, particularly in the US, the company’s biggest market.
“While retention and engagement remain healthy, acquisition growth has not yet re-accelerated to pre-Covid levels,” the company said. “We think this may be due to several factors including the ongoing Covid overhang and macro-economic hardship in several parts of the world like [Latin America].”
Somewhat curiously, Netflix had very little to say about its recent price hike in the US. Instead, it pointed to its recent Play Something feature as one example of the way the company adds value for its users. Ahead of its call, the company also appeared to preemptively waft away any investor concerns about its increased competition during the last two years.
“While this added competition may be affecting our marginal growth some, we continue to grow in every country and region in which these new streaming alternatives have launched,” the company wrote. “This reinforces our view that the greatest opportunity in entertainment is the transition from linear to streaming and that with under 10% of total TV screen time in the US, our biggest market, Netflix has tremendous room for growth if we can continue to improve our service.”
Perhaps Netflix’s bigger concern should be this: its growth and signups are slowing even during a quarter in which Netflix premiered two of its most-viewed films ever, Red Notice and Don’t Look Up. To keep investors’ nerves calm, Netflix will need to start accounting for its sluggish growth, or at least spin up some creative ways to justify it moving forward.
Source: The Verge