Netflix today released its earnings for the first quarter of 2022. And they’re not great. By which, we mean, they’re relatively stagnant, with revenue up to $7.868 billion, a 9.8% increase year over year. But it actually lost 200,000 subscribers — and it’s forecasting 2 million fewer subs for the second quarter of the year
In other words, not the sort of thing that makes investors or Wall Street happy.
While we’re more concerned about Netflix as a tech platform and a destination for cool shows and movies, it’s worth noting the reasons for the lackluster quarter that Netflix cited in its letter to shareholders. First is the global pandemic. No surprise there — everyone knew the massive spike from everyone staying home was going to subside at some point. Netflix says the pandemic actually obscured four other reasons for the slowdown in growth.
- The adoption of smart TVs and other data-reliant devices. “We believe these factors will keep improving over time, so that all broadband households will be potential Netflix customers,” the company said.
- Increased competition from other streaming companies are cutting into Netflix’s numbers.
- “Macro” factors, like global inflation and the Russian invasion of Ukraine.
- Account sharing.
That last one (which Netflix actually listed second) is worth breaking out. Netflix says the service is “being shared with over 100 million additional households,” including more than 30 million in the U.S. and Canada alone. “Account sharing as a percentage of our paying membership hasn’t changed much over the years, but, coupled with the first factor, means it’s harder to grow membership in many markets — an issue that was obscured by our COVID growth.”
More on Netflix
So there’s a global pandemic, war in Eastern Europe, and you giving your Netflix login to your parents, partners, and best friends.
For its part, Netflix says that “our plan is to reaccelerate our viewing and revenue growth by continuing to improve all aspects of Netflix — in particular the quality of our programming and recommendations, which is what our members value most.”
Netflix also says it’s going to figure out “how best to monetize sharing” given that more than 100 million households are freeloading. It’s already done so with a pilot program in Chile, Costa Rica, and Peru that allows people to pay more for an extra two people who don’t live with them, and offers the ability to transfer a profile to a new account, so someone who’s been using another person’s login can start paying for their own and keep their history and recommendations.
“This is a big opportunity as these households are already watching Netflix and enjoying our service,” the company said. “Sharing likely helped fuel our growth by getting more people using and enjoying Netflix. And we’ve always tried to make sharing within a member’s household easy, with features like profiles and multiple streams. While these have been very popular, they’ve created confusion about when and how Netflix can be shared with other households.”
That’s about as close as Netflix came in the letter to saying that the gravy train is ending. It acknowledges that it won’t get all 100 million of those non-paying logins. But it’s going to get something. “While we won’t be able to monetize all of it right now, we believe it’s a large short- to mid-term opportunity.”
In other words, enjoy it while it lasts, you cheapskates.
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