넷플릭스 하락 이유. $50bn wiped off Netflix’s value as subscribers quit

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$50bn wiped off Netflix’s value as subscribers quit

By Daniel Thomas

 

Business reporter, BBC News

 

 

 

 

 

 

One of Netflix most popular series, Bridgerton, launched its second series last month

Shares in Netflix have slumped by 35% after it revealed a sharp drop in subscribers and warned millions more are set to quit the streaming service.

 

It wiped more than $50bn off the firm's market value as experts warned it faced a struggle to get back on track.

 

Netflix faces intense competition from streaming rivals, but was also hit after it raised prices and left Russia.

 

Yet some cast doubt on its plans to boost growth, which include bringing in a free ad-supported service.

 

It also plans to crack down on password sharing, estimating that more than 100 million non-paying households watch the service this way.

 

In a sign of the unease, one of America's best known investors, William Ackman, ditched his $1.1bn investment in Netflix on Wednesday, taking a loss of more than $400m.

 

Netflix hints at password sharing crackdown

Antiques stolen during filming of The Crown

 

 

His hedge fund Pershing Square Capital Management had bought the shares just three months ago.

 

In a brief statement, Mr Ackman said that while Netflix's plans to change its business model made sense, investing in the company felt too risky.

 

"While Netflix's business is fundamentally simple to understand, in light of recent events, we have lost confidence in our ability to predict the company's future prospects with a sufficient degree of certainty," he wrote.

 

In a trading update on Tuesday, Netflix said its total number of subscribers had fallen by 200,000 in the first three months of 2022, falling well short of its target.

 

netflix share graph

 

 

It also said some two million more were likely to quit the service in the three months to July.

 

Some analysts warned that, after period of turbo-charged expansion during the pandemic, the streaming giant has run out of easy ways to grow.

 

Squeezed consumers are cutting back on streaming services to save money, while some feel there is too much content to choose from amid an avalanche of competition from rivals such as Disney and Amazon.

 

"Netflix's wider problem, along with the rest of the sector is that consumers don't have unlimited funds, and that one or two subscriptions is usually enough," said Michael Hewson, an analyst at CMC Markets.

 

"Once you move above that something has to give in a cost-of-living crisis, and while Netflix is still the market leader, it doesn't have the deeper pockets of Apple, Amazon or Disney, which makes it much more vulnerable to a margin squeeze."

 

But Julian Aquilina, senior TV analyst at the media research firm Enders Analysis, said it was wrong to write the firm off.

 

"The streaming market is maturing and the high expectations people had about Netflix are being reset.

 

"But I think it will remain the market leader, it has such a commanding position. If people are going to ditch a subscription, Netflix won't be the first one they choose."

 

He added that the firm had just put up its prices "which always leads to a drop in subscribers, but also means it's making more revenue per customer".

 

Netflix remains the world's leading streaming service with more than 220 million subscribers. It is increasingly producing its own content and shows such as the Crown, Bridgerton and Squid Game have been global hits.

 

The firm had enjoyed uninterrupted quarterly growth in subscribers since October 2011 but on Tuesday it admitted it was losing customers to rivals, while struggling to expand due to password sharing.

 

It also said a decision to raise prices in key markets had cost it 600,000 subscribers in North America alone, while its exit from Russia over Ukraine lost it 700,000.

 

Despite the challenges, revenue grew by $7.8bn (£6bn) in the first three months of the year, up 9.8% compared with the same period last year.

 

That marked a slowdown from earlier quarters, while profits fell more than 6% to roughly $1.6bn.

 

Netflix's shares plunged 35% on Wednesday, and fell a further 3.5% on Thursday.

 

 

 

Have we had enough of Netflix?

By Jennifer Meierhans & Alex Taylor

BBC News

 

 

 

 

 

In 2021 Squid Game became the most-watched series globally in Netflix history

Trying to watch some of Netflix's more recent series all the way through, says Paul Weiner, feels a bit like cramming frankfurters down your throat in a hotdog eating contest.

 

Readers outside the US may not share the American enthusiasm for competitive hotdog swallowing. But maybe they can relate to the feeling.

 

We've all spent the last few years, the last two especially, binge-watching, indiscriminately, too mesmerised to click the off-button.

 

Are we maybe just a little bit sick of it?

 

That's the fear seizing executives in Netflix's boardroom right now. That Mr Weiner, a 28-year-old artist from Denver, Colorado, who loved the streaming service at first, especially for watching old favourites like Star Trek and The Office, typifies a new mood. That after years of skyrocketing subscriber growth, people will switch off, not just their television sets, but their direct debits too.

 

Mr Weiner is one of the hundreds of thousands who have already cancelled, prompting a moment of high drama for the company this week as its share price plummeted and confidence in its future wobbled.

 

People have begun to ask whether Netflix's star, as the world's largest streaming service, is beginning to fade.

 

 

 

Paul Weiner has cancelled his Netflix subscription as he was not a fan of its original shows

"Netflix lost some of my favourite shows," says Mr Weiner. "And I never know which show will disappear next."

 

He thinks there's more clickbait than there was - enticing teaser clips that don't live up to expectations - and some poor writing.

 

"There are better streaming deals than Netflix right now," he says.

 

Netflix was the first to introduce households to TV-on-tap in 2007, entering popular culture with its avalanche of output, and even spawning the phrase "Netflix and chill" as a euphemism for staying in to have sex. But since then many other streaming services have followed Netflix's lead, including HBO, Disney, Apple and Amazon, making it an increasingly crowded market.

 

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"What made Netflix so popular initially was not necessarily its original programming, but the shows it licensed from other production companies, like Friends, giving viewers one convenient place to watch everything they love," says entertainment journalist Tufayel Ahmed.

 

"With companies now taking their shows off the service and putting them on their own streaming platforms, Netflix faces the problem of having to fill the gap."

 

They've done that, launching some hugely successful original output, from the lurid regency romp Bridgerton to the brutal Squid Game, high school comedy Sex Education to the touching drama Afterlife. Sixteen million people signed up in three months at the start of 2020 as coronavirus spread the world and discussing the dubious morality of Tiger King or the historical accuracy of The Crown was a way to switch off from the horror show of the news.

 

But with so many rivals, "all of which are pouring hundreds of millions of dollars into competing with Netflix", says Mr Ahmed, it was almost inevitable the company would eventually lose some ground.

 

Netflix subscribers and selected shows

Mark Mulligan, media analyst at MIDiA Research agrees, pointing to a trend for "savvy switchers" to skip between services.

 

"Everyone had more time and cash during the pandemic which meant the market was artificially buoyant," he says.

 

But now he thinks: "The economy for people's attention has peaked and the amount of spare time people have has run out".

 

Joe Exotic and a tiger

IMAGE SOURCE,NETFLIX

Image caption,

Tiger King provided a shared distraction in the early days of the Covid-19 pandemic

There is also a cost of living crisis to contend with, right around the world. And Netflix, rather than lowering prices has raised them, a move that should help shore up the balance sheet, but has proved unpopular with subscribers, who are themselves feeling the pinch, like 38-year-old Natalie Walters from Catford in South-East London.

 

She hasn't cancelled, but she's switched from the premium service, which in the UK costs £15.99 a month, to the standard version at £10.99.

 

"It becomes about choosing what you keep and what you have to cut down or get rid of altogether," she says.

 

Natalie Walters

IMAGE SOURCE,NATALIE WALTERS

Image caption,

Natalie Walters said the recent increase in Netflix subscription price was "unreasonable"

And 55-year-old Peter Biggins, a coordinator from Norwich has done the same.

 

"I've been with them from the beginning. They have some good shows, but they're not the only player in the market now," he says.

 

And he's not a fan of the other plan Netflix is reported to be contemplating: cracking down on customers who share passwords with other households.

 

"If Netflix is going to go after people who have a subscription, they're going to annoy them," Mr Biggins predicts. And it may not have the outcome they're hoping for.

 

Aram Asai Munoz, a law student in Santiago, Chile, has shared a Netflix account with his parents and sister, who live in separate households, for several years.

 

Since he first signed up - eager to tune in to crime drama Better Call Saul - the monthly cost of the service has roughly doubled, he says.

 

Many of his friends have already cancelled over the price hikes and quality of content and he says he might well do the same if the firm does clamp down on password sharing - after all Netflix is a "frivolity" compared to the other bills that need paying, he says.

 

"Netflix somehow expects that by forbidding password sharing people will become direct new customers, but economic reality dictates the opposite: they will simply walk away from the service," he says.

 

Chart showing Netflix share price

While unpopular with customers, the new strategy of raising prices and clamping down on password sharing could give the company some headroom, says Julian Aquilina, senior TV analyst at the media research firm Enders Analysis, alongside a plan to offer a cheaper service supported by advertising.

 

But the impact will be limited. A survey of US Netflix users found only 11% used a shared log in. Some 85% were paid subscribers and the rest were on free trials, Kagan Consumer Insights found.

 

That doesn't mean Netflix is about to lose too much ground, though, Mr Aquilina says.

 

"It is not like it is going to fade away anytime soon. It is a great product, people like using it," he says.

 

"The question is, how many more people it will reach in the future. Maybe it won't be as much as people expected - it seems those expectations are being reset."