Even as Netflix executives sought to reassure investors in a video interview Thursday that its long-term prospects for streaming media remain bright, with its popular series Bridgerton returning for a second season and a movie from upcoming sci-fi starring Ryan Reynolds, shares slipped.
By the end of the 45-minute earnings interview, Netflix stock was down more than 20%, casting a cloud over the entertainment industry. Wall Street analysts and the company’s own executives struggled to explain why the dominant global streaming service predicted modest growth for the first three months of 2022, when many had anticipated a return to predictable quarterly gains and pre-pandemic.
“It’s hard to say exactly why our acquisition hasn’t returned to pre-Covid levels,” Netflix chief financial officer Spencer Neumann said. “It’s probably a fair bit of a global overhang of COVID that’s still happening after two years of a global pandemic that we’re unfortunately not fully out of yet, some macroeconomic stress in some parts of the world, like Latin America , specifically.”
Netflix forecast subscriber gains of 2.5 million in the January-March quarter, about two-thirds of the 4 million customers added in the same period a year earlier. Wall Street analysts have pointed to increased competition and a slower-than-expected return to normalcy after pandemic distortions as possible factors.
Pivotal Research Group analyst Jeff Wlodarczak said Netflix and other services that added subscribers during the pandemic lockdown in early 2020 — including Disney+ and Peloton — are struggling to regain momentum. equilibrium after outsized gains.
“Streaming isn’t over, it’s the future,” Wlodarczak wrote. “And today, streaming still has a relatively small percentage of global viewers.”
Others saw Netflix’s muted Q1 guidance as a sign of intensifying competition – although co-CEO Ted Sarandos told investors: “We haven’t seen an impact on our engagement. We haven’t seen an impact on retention – all of those things that would typically get you looking at the competition.”
Rival services, such as Disney+ from Disney, HBO Max from WarnerMedia and Amazon Prime Video, spend billions on content to attract subscribers.
“The reality is that the streaming market has become saturated,” wrote Mike Proulx, vice president of research at Forrester. “This translates into more choice for consumers, who are increasingly concerned about the overall costs of their streaming subscriptions.”
Although 90% of Netflix’s growth is expected to come from outside its home market, analysts are closely watching how Netflix’s latest price increase, which pushed the cost of a monthly subscription to $15 (about 1,110 rupees), will affect subscriptions in the United States. and Canada.
“It will be important to assess whether Netflix can retain subscribers at historic rates now that their most popular tier costs the same as HBO Max after their last price increase,” Third Bridge analyst Joe McCormack wrote, “ As we head into 2022, the year many seem to believe will come with an overall saturation of streaming video subscribers.”
Netflix co-founder Reed Hastings told investors there’s plenty of room for growth as streaming will gradually replace traditional television over the next decade or two.
“Right now we just want to stay calm,” he said.
© Thomson Reuters 2022