Netflix Share Value Drops Due to Reduction in Subscriber Growth

Last year, due to the rise in internet usage induced by the Coronavirus pandemic, Netflix enjoyed the best year with as much as 15.77 million new subscribers in one quarter. In April last year, the online streaming platform announced 183 million subscribers worldwide.

However, as things are going back to normal and people don’t have extra time, Netflix has reported a slowdown in subscriber growth, sending its shares tumbling. Initially, the company had predicted that Q1 2021 will yield 6 million new subscribers. However, at 3.98 million new subscribers the numbers are well short of projections. Netflix shares fell 11% in after-hours trading to $489.28, wiping $25 billion off the company’s market capitalization.

The company believes that a lack of new shows may have contributed to the shortfall. However, it is expecting to recover soon after sequels to hit shows are released.

Where the pandemic led to a sudden increase in subscribers, it was also a huge setback for the company as the production pipeline was majorly disrupted.

In its quarterly letter to shareholders, the company detailed,

These dynamics are also contributing to a lighter content slate in the first half of 2021, and hence, we believe in slower membership growth.

Netflix is now expecting a poorer customer growth ahead, with an additional 1 million new streaming customers in the second quarter, far short of the previously predicted 5 million. The streaming giant is also facing increasingly stiff competition from new streaming services entering the market.

Talking about this, Netflix chief executive Reed Hastings said,

We had those ten years where we were growing smooth as silk. It is just a little wobbly right now.

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