Netflix Shares Drop On Growth Concerns

Netflix grew to 222 million subscribers in 2021, but conceded it may have difficulties maintaining the pace of growth it has seen during the pandemic.

It added 18.2 million subscribers last year, about half the number who signed up in 2020.

Subscriber additions for the fourth quarter, at 8.28 million, were slightly above the 8.19 million expected by analysts, according to StreetAccount.

But the company said it expects to add only 2.5 million subscribers in the first quarter of 2022, far below the 3.98 million it added in the first quarter a year earlier.

Competition

Analysts had expected 6.93 million for the first quarter, according to StreetAccount.

Netflix said the lower forecast was in part due to high-profile premieres being scheduled for the end of the quarter, but investors weren’t impressed, sending Netflix’s shares down more than 20 percent after the figures were announced on Thursday night and Friday morning.

“While retention and engagement remain healthy, acquisition growth has not yet re-accelerated to pre-Covid levels,” the company said in a statement, adding that factors such as “Covid overhang and macro-economic hardship” in areas such as Latin America contributed to this.

The company maintains there is still room to grow, but conceded that “added competition” from Disney, Apple, Amazon and HBO was affecting its prospects.

“Consumers have always had many choices when it comes to their entertainment time – competition that has only intensified over the last 24 months as entertainment companies all around the world develop their own streaming offering,” the company said.

Rising costs

“While this added competition may be affecting our marginal growth some, we continue to grow in every country and region in which these new streaming alternatives have launched.”

The company released several successful titles in the fourth quarter of 2021 and raised prices in the US and Canada, in line with its strategy of charging more for exclusive content.

But it also faces rising costs, with a stronger dollar expected to remove 2 percent from its operating margin in 2022.

Revenues increased by 16 percent year-on-year for the October to December quarter, reaching $7.7 billion (£6bn), while quarterly profits rose 12 percent to $607m.

Full-year profits jumped from $2.7bn to $5.1bn, with revenues growing by 19 percent to $26.7bn.

Matthew Broersma

Matt Broersma is a long standing tech freelance, who has worked for Ziff-Davis, ZDnet and other leading publications

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