During the earnings call, Co-CEO Reed Hastings revealed that Netflix actually lost around 200,000 subscribers in Q1/2022 and disclosed that the company is bracing for another 2 million loss in the upcoming Q2/2022. His report caused shares to fall sharply (-23 %) as it disappointed investors and Wall Street alike. Netflix is not in a good place right now. It has to fight for subscribers and yet it does not have any major “event movies” planned for upcoming weeks (at least TV shows are doing well with Bridgerton Season 2 breaking records and Stranger Things Season 4 just around the corner). The platform is struggling in Asia where it priced its tiers too high and Netflix is facing fierce competition due to HBO Max and Disney+ expanding into many new markets.
Right now Netflix is still number one with approximately 221 million subscribers but Disney+ is coming in hot with almost 130 million. Both Disney+ and HBO Max will see a major bump from their current numbers thanks to their recent/upcoming expansion. Netflix was forced to shut down the Russian market (700,000 subscribers) but even with that hurdle included in the math, they were forecasting 2 to 2.5 million subscribers growth in Q1 just a few weeks ago. Just to compare, Disney+ had a record Q1 report and its forecast is tracking at 230 to 260 million subscribers in 2024.
Netflix was criticized for inflated prices of its top tiers and it looks that this policy has finally caught up with the company. What is the next move for Reed Hastings? He already tried to show some damage control during the call: “Those who have followed Netflix know that I have been against the complexity of advertising, and a big fan of the simplicity of subscription,” Hastings said. Disney+, HBO and Hulu already announced or implemented their ad-supported tiers. Netflix will be late to the party and on top of that, it probably won’t lower the price of the premium tiers. Those will just remain ad-free to offer something “extra”.
Industry speculates that this move will rob Netflix of major advantage, but desperate times call for desperate measures. Streaming wars are heating up and the churn is real. Expect more info on this in the upcoming days.