Even as Netflix Inc executives attempted to reassure investors in a Thursday video interview that the company’s long-term streaming media prospects remain bright, with its popular series “Bridgerton” set to return for a second season and a science-fiction film starring Ryan Reynolds on the way, shares fell.
Netflix stock was down more than 20% by the end of the 45-minute results chat, casting a fog over the entertainment industry. When many expected a return to predictable, pre-pandemic quarterly gains, Wall Street analysts and the company’s own management struggled to explain why the world’s biggest streaming service estimated moderate growth for the first three months of 2022.
“It’s tough to say exactly why our acquisition hasn’t kind of recovered to pre-Covid levels,” said Netflix CFO Spencer Neumann. “It’s probably a bit of just overall Covid overhang that’s still happening after two years of a global pandemic that we’re still unfortunately not fully out of, some macroeconomic strain in some parts of the world, like Latin America, in particular.”
In after-hours trading, stocks of tech and media companies that have extensively invested in streaming, such as Walt Disney, ViacomCBS, and Roku, also fell.
Netflix expects to add 2.5 million subscribers in the January-March quarter, which is nearly two-thirds of the 4 million consumers added a year ago. As probable explanations, Wall Street experts cited increased competition and a slower-than-expected return to normalcy following the pandemic’s distortions.
Netflix and other services that gained customers during the pandemic lockdown in early 2020, such as Disney+ and Peloton, according to Pivotal Research Group analyst Jeff Wlodarczak, are trying to reestablish balance following outsized increases.
“Streaming is not over, it is the future,” Wlodarczak wrote. “And today, streaming still has a relatively small percentage of global television viewership.”
Others interpreted Netflix’s lower first-quarter prediction as a sign of escalating competition, despite co-CEO Ted Sarandos’s assurance to investors: “We didn’t notice any negative effects on our relationship. We didn’t see a drop in retention or any of the other indicators that would normally prompt you to consider competition.”
To attract users, rival services such as Disney+, WarnerMedia’s HBO Max, and Amazon Prime Video are investing billions on content.
“The reality is that the streaming market has become saturated,” wrote Mike Proulx, vice president of research for Forrester. “This translates to more choice for consumers, who are growing concerned with the aggregate costs of their streaming subscriptions.”
Despite the fact that 90 per cent of Netflix’s growth is projected to come from outside the United States and Canada, experts are keeping a careful eye on how the company’s recent price rise, which increased the cost of a monthly subscription to $15, would effect subscriptions in those countries.
“Whether Netflix can retain subscribers at historical rates now that their most popular tier costs the same as HBO Max after their most recent price increase will be important to gauge,” wrote Joe McCormack, Analyst at Third Bridge, “As we head into a 2022 year that many seem to believe will come with streaming video subscriber saturation overall.”
As streaming steadily replaces traditional television over the next decade or two, Netflix co-founder Reed Hastings warned investors that there is plenty of room for development.
“For now, we’re just like staying calm,” he said.
(Adapted from Reuters.com)