It would have been enough for Netflix to drop by just 200,000 net subscribers, or less than 0.1% of the total, to send Wall Street into a panic, with shares falling by more than a third in a single session on Wednesday. its value has been amputated. 20.
This loss of subscribers and the promise of“Investments to boost sales obscure Netflix’s beautiful history”Wells Fargo analysts wrote, not hesitating to halve their price target for the stock. “Netflix has lost its shine”they claimed.
A sign that this first quarter of 2022 is no coincidence, Netflix expects a much stronger drop of two million net subscribers in the second quarter. “I’m not sure if this is a turning point, but it shows the entry into a new phase of slow growth”noted Scott Zari of S&P, “The question is how long it will take.” “Management has been pretty clear that we can only expect very weak growth in 2022 and 2023”Bank of America analysts said in a note.
The change was palpable in the tone of the presentation of the results, Tuesday evening 19 April. Less talked about the success of Bridgerton True ozarktwo flagship series of the online video service, than of these 100 million households who, thanks to shared identifiers, watch Netflix without paying.
“When we were growing fast, that wasn’t a priority”admitted the co-founder, Reed Hastings, during the presentation. “And we’re working hard on that now.” “We don’t want to stop this sharing”nevertheless warned Gregory Peters, operations manager, but “convert better” this inappropriate view of earnings. “Future growth will depend on their ability to monetize these households”said Scott Zari.
To attract these paying viewers, Netflix is also preparing cheaper offers with advertising within a year or two. After long defending an ad-free model, the Los Gatos, California-based company will finally imitate its main competitors, from Disney to HBO Max, with Apple remaining the only exception. “Do they stand behind the competition” in this case, “Yes”admits Jawad Hussain, of S&P, even if he “maybe a little easier” that their competitors can use online advertisements, “because they have always been a technologically advanced group”†
For Jeff Wlodarczak, analyst at Pivotal, “it looks like the streaming market is now fully invested globally” after the Covid-19 pandemic which accelerated its penetration. “It’s now about converting pirates, taking market share (from others) or driving up prices.” The latter axis will soon become unavailable for use by Netflix, which had already raised its prices again in January, making it the most expensive service of all the major players in the United States.
On the budget side, “you will definitely see an impact in terms of content spend”, warns Paul Hardart, a professor at New York University (NYU). Netflix had so far set a $19 billion envelope for its content in 2022, up from 17 billion last year. For Joel Mier, professor of marketing at the University of Richmond, if the changes announced are: “meaningful”they stay “peripheral”† The “the long-term strategy remains to invest in local creation and to build a presence in video games”†
With its 221 million subscribers, ‘Netflix remains by far the market leader in streaming’remembers Scott Zari. “They are very far ahead”in abundance Paul Hardart, “especially on a global level, which gives them a big advantage”† Far from being a special case, the platform also offers a taste of its competitors, which “will also face these problems at some point”according to Jawad Hussain. This is not good news for Netflixsupports Paul Hardart, “but it’s arguably worse for other platforms trying to assert themselves.”
