US-based streaming giant Netflix saw its shares plunge more than 25% in after-hours trading last night on news of changing fortunes.
The slide wiped out about £30billion of its stock-market value after the company said inflation, the war in Ukraine and fierce competition contributed to a loss of subscribers for the first time in more than a decade - and it also predicted deeper losses of viewers ahead.
The group said it lost 200,000 subscribers in its first quarter - falling well short of its forecast of adding 2.5million subscribers. Suspending service in Russia after the Ukraine invasion took a toll, resulting in the loss of 700,000 members.
Reuters says that, since Netflix warned in January of weak subscriber growth, the company has lost nearly half of its value.
The lagging subscriber growth is prompting Netflix to contemplate offering a lower-priced version of the service with advertising, citing the success of similar offerings from rivals HBO Max and Disney+.
Netflix chief executive Reed Hastings said: "Those who have followed Netflix know that I've been against the complexity of advertising, and a big fan of the simplicity of subscription. "But, as much as I'm a fan of that, I'm a bigger fan of consumer choice."
Reuters adds that the company offered a gloomy prediction for the spring quarter, forecasting it would lose 2million subscribers, despite the return of such hotly-anticipated series as "Stranger Things" and "Ozark" and the debut of the film "The Grey Man" starring Chris Evans and Ryan Gosling.
Other video streaming-related stocks have also been hit by the update from Netflix, with Roku dropping over 6%, Walt Disney falling 5% and Warner Bros Discovery down 3.5%.
Mr Hastings told investors that the pandemic had "created a lot of noise", making it difficult for the company to interpret the surge and ebb of its subscription business over the last two years. Now, it appears the culprit is a combination of competition and the number of accounts sharing passwords, making it harder to grow.
Netflix is testing technology that will ask subscribers to pay an extra fee if it detects people at multiple addresses logging in to the same account, in an attempt to crack down on sharing passwords.
It estimates that 100million additional households are accessing the service on top of 222million paying households.
New research out yesterday suggests the rising cost of living in Britain has led to many households cancelling their streaming subscriptions.
A total of 1.51million services were canned in the first three months of 2022, market research firm Kantar said.
More than half a million cancellations were attributed to "money saving", with households budgeting for higher prices and energy bills instead.
About 58% of Britain's homes now have at least one paid streaming service.
FTSE 100
Meanwhile, the UK’s top share index, the FTSE 100, was up one point at 7,602 shortly after opening this morning, following yesterday’s 15-point drop.
Brent crude futures were up 0.07% at $107.41 a barrel.
Companies reporting today
- Finals: Oxford BioMedica, Wood
- First-quarter results: Tesla
- First-quarter statements: Antofagasta, Bunzl, Centamin, CRH, Heineken, IntegraFin Holdings, QinetiQ Group, Quilter