There was a freefall of 35.12% in the share price of Netflix on Wednesday, which left Wall Street shocked. The share price tumbled after the company announced that there was an unexpected drop in the number of subscribers.
It lost about 2,00,000 subscribers in the first quarter of 2022 and is anticipating a loss of 2 million subscribers in the second quarter. This will leave it with 220 million worldwide subscribers, which is much more than other video streaming services.
Its market capitalization now stands at $100 billion, the smallest among the FAANG group of stocks that include Facebook (Meta Platforms), Amazon, Apple, and Google (Alphabet) apart from Netflix. Its shares are currently trading at $229.19 apiece.
There are millions of people who use passwords shared by friends or family and the freefall forced the company to consider experimenting with ads.
The company said that about 100 million households or a third of the viewers are streaming its services for free and that they want to get paid to some extent for the freeloaders.
Netflix might have already found a solution to this. It has started experimenting in Latin America with programs that convince unsubscribed viewers to sign up. For example, in Costa Rica, Netflix’s plans range from $9 to $15 a month but subscribers can create sub-accounts for two other individuals outside their household for only $3 per month.
Netflix’s CEO Reed Hastings suggested that they might follow something similar in other markets as well. He indicated that the company will probably spend the next year assessing different approaches to get subscribers back.
Last year, during a test, the company prompted viewers to verify their accounts via email or text. However, if they are asked to pay more or if Netflix ends password sharing, then it might push users to sign off.
Apple, Walt Disney, HBO and other deep-pocketed rivals are chipping away at Netflix’s dominance with their own streaming services.
“Netflix is a poster child for what happens to growth companies when they lose their growth,” said Kim Forrest, chief investment officer at Bokeh Capital Partners in Pittsburgh.
Elon Musk took to Twitter to reveal that the “woke mind virus” was making Netflix unwatchable. Woke is a slang word that is used for people who are aware of and actively attentive to important facts and issues (particularly issues related to social and racial injustice).
“I think it’s going to take some time for them to start to recognize whether or not Disney and Roku and Netflix and Hulu and Paramount might not be growth companies any more, that they might have hit their saturation point,” said Jim Bianco, president of financial market research firm Bianco Research in Chicago.
The Indian Scenario
Netflix is not a very successful player in the OTT space in India, mainly due to the expensive subscription fee. As for the future in India things aren’t looking too bright for Netflix as Players like Disney+Hotstar are rapidly expanding all whilst being priced competitively.
