Netflix disappoints with new business and outlook

Status: 01/21/2022 09:01 a.m

At the beginning of the corona pandemic, the Netflix streaming service was one of the big winners. Now growth is slowing and the outlook is sobering thanks to stiff competition. The stock fell sharply in value after the latest figures were presented.

The world’s largest streaming provider Netflix is ​​having a hard time with the increasing competition from Disney, Apple and Amazon. Thanks to streaming hits like “Squid Game”, the group gained 8.28 million new customers in the past quarter, but market observers had expected around 110,000 more. A total of 222 million worldwide currently subscribe to the service.

Although the failure to meet the forecast does not appear spectacular at first glance, the experts read it as a clearly declining growth trend. For the current first quarter of the new year, Netflix expects only 2.5 million new customers. Even so, Netflix remained well below the forecasts of the analysts. And in the first quarter of 2021, the group had gained almost four million new subscribers. “Subscriber retention and audiences remain strong, but new subscriber growth has not returned to pre-pandemic levels,” Netflix acknowledged.

The earnings figures still look good: In the final quarter, sales rose by 16 percent compared to the previous year to 7.7 billion dollars. The profit grew by around twelve percent to 607 million dollars, which corresponds to 537 million euros.

competition intensified

Netflix experienced a real rush of customers, especially at the beginning of the pandemic. In the first wave of the pandemic in 2020, the group gained 36 million new customers. In 2021, the number grew by 18.2 million. But growth has slowed down for a long time. While Netflix’s market share was 50 percent in 2018, it is expected to drop to 28 percent by 2023, according to the analysis institute eMarketer.

Because the streaming group is struggling with strong competition. Rivals like Disney+, Hulu and HBO Max are arming themselves and investing billions to participate in the success of the business model. New providers such as Peacock and Paramount+ have also been added. In the quarterly report, Netflix notes that competition has intensified as entertainment companies around the world develop their own streaming services.

One expert also points out that people in the US would try to cut costs due to high inflation. “If people are struggling to afford gas and groceries, they’re going to have a hard time justifying another streaming service,” said independent analyst Rob Enderle.

Industry experts have long been asking whether the streaming business is heading towards saturation. Because of the restrained growth prospects in established markets such as North America, Netflix is ​​therefore focusing heavily on its international expansion. Asia and Europe were the most important markets for Netflix in 2021, each with over seven million new users. In the US and Canada, the largest markets, just over a million new customers were added. Netflix raised prices there last week.

Netflix shares fell 20 percent in after-hours trading, meaning the company lost a fifth of its market value. The shares of other streaming providers also came under strong pressure. For the entertainment giant Walt Disney, it went down by around five percent at times. The parent company of Netflix competitor Paramount+, ViacomCBS, and the live sports streaming service FuboTV also suffered significant price losses.

Reference-www.tagesschau.de

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