SAN FRANCISCO — Netflix lost nearly a million subscribers in the spring amid increased competition and runaway inflation that squeezes household budgets, heightening the urgency behind the video streaming service’s efforts to launch a cheaper option with commercial interruptions.
The April-June contraction of 970,000 accounts, announced as part of Netflix’s second-quarter earnings report on Tuesday, is by far the largest quarterly subscriber loss in the company’s 25-year history. It could have been much worse, however, given that Netflix management released an April forecast that announced a loss of 2 million subscribers in the second quarter.
Netflix has likely been spared the continued popularity of “Stranger Things,” its sci-fi/horror series that debuted in 2016. After the series’ fourth season was released in late May, Netflix said, viewers watched a total of 1.3 billion hours over the next four weeks – more than any other English-language series in the service’s history.
The lower loss of subscribers, combined with prospects of a return to growth over the July-September period. helped lift Netflix’s beaten stock 7% in extended trading after the numbers were released.
Netflix co-CEO Reed Hastings didn’t try to sugarcoat things during an earnings conference call on Tuesday. “It’s hard to lose a million subscribers and call it a hit,” he said.
The company’s April-June decline follows a loss of 200,000 subscribers in the first three months of the year, marking the first time that Netflix’s total subscriber count has declined in consecutive quarters since its transition from offering DVD rental by mail to video streaming began 15 years ago.
The loss of nearly 1.2 million subscribers in the first half of this year also provides a starting contrast to the pandemic-driven growth Netflix enjoyed in the first half of 2020, when its streaming service attracted nearly 26 million subscribers.
Despite the slowdown, Netflix still earned $1.4 billion, or $3.20 per share, in the quarter, a 6% increase over the same period last year. Revenue increased 9% from the same period last year to nearly $8 billion.
Netflix ended June with 220.7 million subscribers worldwide. far more than any of its newer competitors such as Walt Disney Co. and Apple. and in a sign of hope, Netflix management has predicted that its service will add around 1 million subscribers in the July-September period, signaling that the worst of its crisis may be over.
Although Netflix’s subscriber losses in the spring were not as severe as investors and management feared, the downturn served as a grim reminder of the challenges now facing the Los Gatos, Calif., company after a decade of unbridled growth.
Netflix’s share price has fallen nearly 70% so far this year, wiping out an estimated $180 billion in shareholder wealth. Since then, other video streaming services have made great strides in attracting viewers.
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