Netflix attracted 8.3 million new members in the fourth quarter, bringing its total to 222 million, but the firm warned on Thursday that growth would decelerate in the first months of 2022.
Netflix stocks declines
In after-hours trading, the stock dropped about 20% due to the news in the company’s earnings statement. Netflix expects to gain 2.5 million new customers in the first quarter of this year, down from four million in the same time of 2021. That would be one of the slowest first quarters in the streaming giant’s history.
The number of new members acquired in the fourth quarter fell short of Netflix’s forecasted 8.5 million. However, the 1.2 million added in the United States and Canada constituted the region’s best quarter since the outbreak began. As has been the case for the past few quarters, most of the growth came from outside the United States.
Netflix’s co-chief executive said,
Reed Hastings, acknowledged being disappointed by the slower rise in subscribers during an investor conference call on Thursday. “We’re keeping our cool and figuring things out,” he remarked.
“It might very well be Covid effects,” he continued. We may be targeting a smaller market than we anticipated. “However, I’m not sure why.”
Competition has grown dramatically in recent years, with Disney+ and HBO Max making considerable inroads into the streaming market. HBO Max’s subscriber base surpassed Warner Media’s expectations this month, with 73.8 million consumers at the end of the year.
Mr Hastings, on the other hand, dismissed the possibility that the slowdown is due to competition. “There’s more competition than there’s ever been,” he observed, “but we’ve had Hulu and Amazon for 14 years, so there’s no qualitative shift there.”
Netflix said last week that it was hiking the monthly costs for all of its membership plans in the United States, with the basic package going up to $9.99 and the standard procedure going up to $15.49. (The basic programs allow users to stream in standard resolution on one device, while the standard plan allows for two in high definition.)
“It’s a bit of an acknowledgment that they could be reaching the growth limit in the United States and Canada,” said Berna Barshay, an Empire Financial Research analyst. “At least in the United States and Canada, growth will most likely come from price rather than volume.”
Rates were last hiked in October 2020, and the company’s subscriber base continued to expand. As a result, analysts predict that the price hike would result in more cancellations but higher-income this time.
“I believe they have a license to increase the price,” Ms Barshay stated. “At $15.49, they’re only 49 cents more expensive than HBO Max. So they have no excuse not to be in charge. Their top-end quality is on par with anyone’s, and their quantity simply outnumbers everyone.”
According to the company
The fact that many new releases slated for the end of the quarter was one reason for Netflix’s disappointing first-quarter estimate. For example, according to the company, the second season of “Bridgerton” and “The Adam Project,” a film starring Ryan Reynolds, will both premiere after the first quarter in March.
The fourth quarter’s expansion was fuelled by excellent content toward 2021. According to Netflix, films like “Red Notice” and “Don’t Look Up” were the most-watched movies in the company’s history, and returning programs like “Cobra Kai” and “The Witcher” also drew in viewers. In addition, in the fourth quarter, “Squid Game,” published at the end of the third quarter, broke through globally. Netflix said that 1.65 billion hours of viewing time had been recorded.
Netflix’s other co-chief executive, Ted Sarandos, seemed more upbeat about the company.
“What’s truly fantastic about 2021, despite all of those conditions, is that we were able to verify two theses that we bet on years ago,” he explained. “Our commitment to foreign programming is a huge one.”
“And we were wagering that you could take films and series from anyplace in the world and delight the entire world,” he continued, referring to shows like “Squid Game,” “Call My Agent,” and “La Casa de Papel/Money heist.”
On $7.7 billion in fourth-quarter revenues, the corporation had a profit of $607 million. According to S&P Capital IQ, investors anticipated a profit of $379 million and sales of $7.7 billion.