You know there’s a problem when a big company’s quarterly letter to shareholders begins with “Our revenue growth has slowed considerably”. That big company is Netflix, which published its latest financial results yesterday.
Its revenues were still up 9.8% year-on-year to $7.87bn, but that growth was a sharp deceleration from earlier in the year. Worse still, Netflix actually lost subscribers in the final quarter of 2021: falling from 221.8m paid memberships at the end of September to 221.6m at the end of December.
Only 200,000 people, then, but in the context of long-term growth before that it’s a red flag, especially as Netflix is expecting to lose another two million in the first quarter of 2022.
The company’s share price dropped by 23% in after-market trading following the announcement. Netflix is blaming “our relatively high household penetration – when including the large number of households sharing accounts – combined with competition” for the “headwinds”.
Meanwhile, CEO Reed Hastings told analysts that Netflix will be introducing advertising-supported plans for the first time in the next year or two as part of its efforts to reignite growth.