Netflix loses a quarter of its value on slowing subscriber growth

Shawn Knight

Posts: 14,059   +153
Staff member
In brief: Share value in Netflix plummeted after the streaming video giant shared its fourth quarter earnings report Thursday afternoon. As of writing, shares are down 24.87 percent and if it holds until markets close, Netflix could see its worst day in nearly a decade.

Netflix finished the quarter with 222 million paying subscribers, adding 8.3 million members during the last three months of 2021. Revenue for the quarter was $7.7 billion, up 16.0 percent compared to the same period a year earlier.

What hurt Netflix the most, and why its stock is sliding in morning trading, is slowing growth.

For the full year 2021, Netflix added 18 million subscribers compared to 37 million in 2020. For Q1 2022, the company expects to add 2.5 million additional subscribers – far less than the four million it welcomed in the year-ago quarter.

Netflix said its guidance reflects a more back-weighted content slate in Q1 2022. Netflix also acknowledged that competition has intensified over the last 24 months as several entertainment companies have since developed their own streaming offerings.

Just last week, Netflix increased prices across the board in the US and other regions and said it would use the extra money to continue to finance the production of high quality streaming content. The standard tier, which lets you watch on two screens and includes HD content, now commands $15.49 per month, an increase of $1.50 over the previous price.

Netflix closed at $508.25 on Thursday and is currently trading for $386.48.

Image credit: Dima Solomin

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Dimitriid

Posts: 2,105   +4,031
This might seem counter intuitive but I think the pandemic has had a delayed effect that's more pronounced on Netflix: people thought that with a lot more people having to follow stay-at-home mandates and such the subscriber count would increase or hold steady.

And I have no doubts it did. However, the issue here is content: Netflix had the right idea by shifting heavily towards original content and some hit shows like Squid Game quickly gaining mainstream following has certainly helped that.

But the thing about producing content is that well, it's still just highly expensive. Honestly most audiences only accept amateur actors, writers and production values up to a point but if we talking about the serialized style of shows Netflix has championed you gotta think they're going up against giants like HBO and their ability to basically poor in production values that are an order of magnitude above even professional outlets like Netflix.

So obviously they can't really speed up originals: both because of the pandemic restrictions and because of the limited scope of their budget. But the competition in traditional media have not only the money to outgun Netflix, but the backlog they've worked so hard to gatekeep: Sure Netflix can have *some* access to third party content but it's always putting them at a disadvantage vs those same media companies either requesting far too much upfront for the content or just sequestering it away whenever it's suitable for them to launch a competing service.

So for the time being I think the old media can potentially win out. Unless Netflix essentially tries to remove that expectation of super high production values and get people used to more amateur productions that are infinitely cheaper to produce. We know people *will* consume amateur content as their main source of entertainment and youtube was taking off with it before they decided to also listen to advertiser pressure instead of supporting the content creators that were upholding the value of the company.

Netflix is on a different paradigm but they could easily shift gears and try to capture some of that audience that while they *can* be persuaded to watch high production values shows if a giant like Disney goes "Look! Is quiet helmet guy! And we gave him a baby alien!" they could just as easily just keep going back to average guys shooting content with consumer cameras in single person operations or microscopic crews and would still be doing so if they weren't strangled by lack of promotion and brutal copyright restrictions and 0 backing from youtube.
 

psycros

Posts: 4,083   +5,619
Why is nobody mentioning Netflix's price increases over the past couple of years? Or the fact that greedy content producers all want to be their own exclusive distributors? The Balkanization of streaming is going to put consumers right back where they were with cable..and now that they've gotten used to everything on demand, that means they'll just start pirating.
 

Neatfeatguy

Posts: 797   +1,395
One problem with Netfilx is the releasing of a season of content at once.

If a show has 10 episodes and someone is just waiting to see it and nothing else on Netflix, they'll drop their subscription until the new season releases. Once it does, re-sub for that one month ($12-15, whatever it is), watch 10 episodes of the new season they wanted to see and maybe dance around on Netflix for a few weeks before the month is up and unsub again.

Why do you think Disney is doing 1 episode a week on releases? Someone really wants to see the new Marvel series and there are 8 episodes, well, you need to sub for 2 months to see all 8 episodes since they drop 1 a week and if they can pace it correctly, they could almost release a new episodic season of all their Marvel shows nearly back to back - thus ensuring any fan of them would want to keep that subscription because new content would be on there almost every week.

I know Netflix has been testing this as well, but they really should move to it if they want to hold subscriptions longer. When you've captivated your audience for a new series and all 8/10/12 episodes can be watched in just half a day of binge watching.....what's left to keep the subscriber's attention?

A lot of people love to binge watch on Netflix - I have done it from time to time myself - and I know some people would be upset, but if they could slow their distribution of original material by releasing episodes by 1 a week over a set amount of time instead of dropping them all at once, people would have more of a constant flow of new content as new original series pop up and new movies pop up in-between the series' lull times.

Then Netflix would hold subscriptions longer and people wouldn't be bored out of their minds after they binge watched a couple of new series and now there's nothing new for weeks or even months that comes up.

Years ago with TV it was weekly episodes of popular TV series. Just think if The X-Files dropped a full season of episodes right after the other. You'd be excited! Then you'd see them all right away, but then have nothing to look forward to down the road for a year until the next season released.
 

Shadowboxer

Posts: 2,073   +1,651
Too expensive for me for something I dont really use that often so I cancelled after enjoying squid game and Dave Chappelles closer. £15 a month in the UK. If it were under £10 id have stayed.
 

McMurdeR

Posts: 491   +625
Almost everyone I know who can afford it already has a sub with Netflix. It's absurd to suggest that they can sustain the kind of growth they have enjoyed.

And if they're not careful with those price hikes, they'll see subscribers leaving or taking subscription holidays.
 
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wiyosaya

Posts: 7,506   +6,330
Why do you think Disney is doing 1 episode a week on releases? Someone really wants to see the new Marvel series and there are 8 episodes, well, you need to sub for 2 months to see all 8 episodes since they drop 1 a week and if they can pace it correctly, they could almost release a new episodic season of all their Marvel shows nearly back to back - thus ensuring any fan of them would want to keep that subscription because new content would be on there almost every week.
As I plan on handling it, I'll subscribe when they have the entire season on Disney+, then drop it. That will be cheaper for me.

For instance, when they have the entire third season of The Mandalorain and the entire second season of The Bad Batch, I'll subscribe for a month, watch both, then cancel again. Until subsequent seasons of both arrive.

That they are dropping a drop or two, every week, of what they think is highly addictive content is not enough for me to want to maintain a subscription to Disney+

As to Netflix, the stock price drop is a typical knee-jerk reaction, IMO.

There is the issue of other content providers pulling their content from Netflix, however, I think this model may not play out well. People, like me, who were fed up with sky-high prices for cable are not going to subscribe to every content provider's streaming service because that will end up costing just as much as cable, and like me, there may not be enough content that I want to watch on the other services to maintain a subscription; people, like me, will find other ways to watch that content even without pirating.

Right now, there are only a few services that have a few shows I want to watch. HBO (1 series - His Dark Materials) Hulu (one series - Killing Eve), Disney+ (mentioned above), and Paramount+(Star Trek: Picard, Star Trek: Discovery, and The Good Fight).

In the case of Paramount+, they release their content on DVD and/or Blu-ray, and I am willing to wait until my local library gets it on disk - then I borrow it from the library.

About the only service I want to keep is Netflix. For me, there are several items I want to watch, but have not done so, and I am awaiting new seasons (which have already been announced) of several others.
 

waclark

Posts: 319   +211
This might seem counter intuitive but I think the pandemic has had a delayed effect that's more pronounced on Netflix: people thought that with a lot more people having to follow stay-at-home mandates and such the subscriber count would increase or hold steady.

And I have no doubts it did. However, the issue here is content: Netflix had the right idea by shifting heavily towards original content and some hit shows like Squid Game quickly gaining mainstream following has certainly helped that.

But the thing about producing content is that well, it's still just highly expensive. Honestly most audiences only accept amateur actors, writers and production values up to a point but if we talking about the serialized style of shows Netflix has championed you gotta think they're going up against giants like HBO and their ability to basically poor in production values that are an order of magnitude above even professional outlets like Netflix.

So obviously they can't really speed up originals: both because of the pandemic restrictions and because of the limited scope of their budget. But the competition in traditional media have not only the money to outgun Netflix, but the backlog they've worked so hard to gatekeep: Sure Netflix can have *some* access to third party content but it's always putting them at a disadvantage vs those same media companies either requesting far too much upfront for the content or just sequestering it away whenever it's suitable for them to launch a competing service.

So for the time being I think the old media can potentially win out. Unless Netflix essentially tries to remove that expectation of super high production values and get people used to more amateur productions that are infinitely cheaper to produce. We know people *will* consume amateur content as their main source of entertainment and youtube was taking off with it before they decided to also listen to advertiser pressure instead of supporting the content creators that were upholding the value of the company.

Netflix is on a different paradigm but they could easily shift gears and try to capture some of that audience that while they *can* be persuaded to watch high production values shows if a giant like Disney goes "Look! Is quiet helmet guy! And we gave him a baby alien!" they could just as easily just keep going back to average guys shooting content with consumer cameras in single person operations or microscopic crews and would still be doing so if they weren't strangled by lack of promotion and brutal copyright restrictions and 0 backing from youtube.

I don't think HBO is as large as you think they might be. According to Business Insider, Q1 2021 HBO Max (US) had 9.7M subscribers HBO 73.8M worldwide, Netflix 67M US, 207 worldwide. HBO is growing, but so is Netflix. Having Time Warner behind them doesn't hurt, but that doesn't mean Netflix doesn't have deep pockets to fund quality content.

I think Netflix is holding their own with a combination of quirky, low budget hits and decent, more expensive shows. Big budgets don't guarantee big hits. Hollywood is littered with the corpses of directors who went crazy with the checkbook only to have a financial flop on their hands.
 

GoldenGoat

Posts: 36   +28
Raising the price is probably not going to help their subscriber growth. I wonder if this is to fund Android games or expansion into other countries. It doesn't seem like their video content is improving. People who want mobile games should buy a game service. I don't know anyone who wants mobile games from Netflix. I will probably drop Netflix and try something else. There are many other streaming services and maybe it is time to give a different one a try.
 

wiyosaya

Posts: 7,506   +6,330
I think Netflix is holding their own with a combination of quirky, low budget hits and decent, more expensive shows. Big budgets don't guarantee big hits. Hollywood is littered with the corpses of directors who went crazy with the checkbook only to have a financial flop on their hands.
Even well-regarded directors produce dogs once in a while.
 

wiyosaya

Posts: 7,506   +6,330
They article is also interesting for what it does not say, and what it does not say is that Netflix is losing subscribers. It just says that growth in 2021 did not match growth in 2020. The thing is, there was growth in 2021. Expecting unbridled growth year-over-year is totally unrealistic, IMO. As I mentioned before, this sounds like a knee-jerk reaction to the fact that growth in 2021 was less than that in 2020.

Also, the quality of content is clearly subjective.
 

gdavid65

Posts: 36   +34
This whole streaming content thing is just going down the toilet..there are already too many to choose from, and the quality (outside of 2-5 good series each per year) is going downhill fast. Already Disney is jumping the shark, and they haven't even raised prices yet significantly.. their first 1 or 2 spin offs had credit, Wanda Vision or The Mandolorian say, but since then the rest has been s&&&&&

Going back to the days of pirating the good for free, and not bothering to pay for the rest of average is coming back to me.
 

HofyPC

Posts: 109   +103
Constant price increases and lack of watchable content. I am going to finish watching what little is left on my list and cancel it.
 

waclark

Posts: 319   +211
Even well-regarded directors produce dogs once in a while.
Yup. Sometimes, what seemed like a great script turns into garbage when captured on film. There are lots of good examples of small budgets and unknown actors producing a great film.