Netflix shares fall as company sees slowing subscriber growth

netflix Inc.

NFLX -1.48%

missed its subscriber target for the last quarter and forecast a much lower number of subscriber additions for the current quarter than a year ago, sending its shares down 19% in trading after the normal office hours.

The company said on Thursday that it added 8.3 million subscribers in the last quarter, bringing its global paid subscriber base to 221.8 million. The streaming platform had forecast 8.5 million net new subscribers for the period, in line with the fourth quarter of the previous year. The consensus forecast from Wall Street analysts was 8.3 million, according to FactSet.

Revenue rose 16% to $7.71 billion in the quarter, in line with analyst forecasts of $7.71 billion. The company’s quarterly profit was $1.33 per share, compared with profit of $1.19 a year earlier. Analysts were targeting 83 cents per share.

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Following the results, Netflix shares fell in after-hours trading on concerns over the company’s guidance. Netflix said it plans to add 2.5 million subscribers in the current quarter; a year ago, the company added four million in the same period.

Netflix said its forecast reflected the fact that more of its new content was weighted at the end of the current quarter, including the second season of “Bridgerton,” which is expected to launch in March.

“Furthermore, while retention and engagement remain healthy, acquisition growth has yet to re-accelerate to pre-Covid levels,” Netflix said in its shareholder letter. The company said several factors were likely to blame, including the current Covid-19 overhang and struggling economies in different parts of the world.

Through Thursday’s close, the stock was down nearly 16% in 2022 amid a sell-off in tech stocks to start the year.

Netflix subscriber growth has tapered off since a surge in signups occurred at the start of the pandemic in 2020, when lockdowns meant to deter the spread of Covid-19 led to people spending most of their time at home. The reopening of the economy after the rollout of Covid-19 vaccines has helped drive more people away from their screens. Competition has also increased, with the likes of Amazon.com Inc.

First, AT&T Inc.

HBO Max and Walt Disney Co.

‘s Disney+ are bolstering their content lines.

Netflix reloaded 2021 with hits including the return of dark drama “You” and the series “Cobra Kai.” Films such as “Red Notice”, starring Dwayne Johnson, Ryan Reynolds and Gal Gadot, and “Don’t Look Up”, starring Leonardo DiCaprio and Jennifer Lawrence, were also released during the fourth quarter.

Netflix had forecast 8.5 million net new subscribers for the quarter when the service began offering “The Power of the Dog” starring Kirsten Dunst.


Photo:

Kirsty Griffin/Netflix/Everett Collection

“Don’t Look Up,” a satire on a comet that is on a collision course with Earth, logged more than 152 million viewing hours on the streaming platform in the week ended May 2. January, making it the most-watched show on the service as measured by weekly data going back to the summer. The results for “Don’t Look Up” come after the success of “Squid Game,” a South Korean dystopian drama that debuted in September and has become a global phenomenon.

Netflix last week raised the price of its monthly plans in the US and Canada, the streaming platform’s first such increase since 2020. In contrast, it lowered its prices in India last month to better position itself against its rivals in a crucial growth market. .

Other streaming services offered their own original content late last year. Disney+ saw a surge in app downloads in December thanks to releases such as “Hawkeye” and “The Book of Boba Fett,” as did ViacomCBS Inc.

Paramount+ with releases such as “Clifford the Big Red Dog,” “Mayor of Kingstown” and the “Yellowstone” prequel “1883,” said UBS Securities analyst John Hodulik.

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

More Netflix viewers watched dubbed versions of South Korean drama “Squid Game” than subtitled versions. WSJ caught up with one of the show’s English-speaking voice actors to see how dubbing foreign content is helping fuel the streaming company’s growth. Photo illustration: Sharon Shi

To attract new audiences, Netflix would need to spend more in these markets. “This international growth will increase the pressure for the company to develop more and more localized content, as content costs continue to rise alongside subscriber growth,” said Michael Pachter, analyst at Wedbush Securities.

Disney follows a similar playbook.

After reporting a significant slowdown in Disney+ subscriber signups for its fiscal fourth quarter ended Oct. 2, the company on Wednesday made changes to its streaming management and launched a hub dedicated to creating international content. Rebecca Campbell, a longtime Disney executive, has been appointed to oversee the hub.

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Write to Kimberly Chin at [email protected]

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