Netflix loses subscribers for the first time in a decade as the cost of living bites Business

Netflix has admitted its subscriber numbers are dropping for the first time in more than a decade, in part because of its decision to pull out of Russia.

The US streaming giant lost 200,000 subscribers in the first three months of the year, well below Wall Street forecasts that it would add 2.5 million subscribers.

Shares of Netflix fell 21% in after-hours trading as it warned it would lose another 2 million subscribers in the second quarter of the year.

Its decision in early March to suspend service in Russia after invading Ukraine resulted in the loss of 700,000 members. The company also faces intense competition from streaming rivals like Disney+ and is battling a cost of living crisis across the West.

Netflix said: “The large number of households sharing accounts, combined with competition, is creating headwinds for revenue growth. The big Covid boost to streaming has clouded the picture until recently.”

The company is testing technology that will ask subscribers to pay an additional fee if it detects people at multiple addresses logging into the same account, in a bid to crack down on password sharing.

He estimates an additional 100 million households are accessing the service on top of the 222 million paying households, which he says “means it’s harder to grow membership in many markets – a problem that has been obscured by our growth of Covid”.

Stocks are on the verge of falling below pre-pandemic levels. Covid lockdowns led to large numbers of people subscribing to streaming services, sending stocks soaring.

In a glimmer of positive news for the company, the second season of Bridgerton has logged 627 million viewing hours, making it the biggest English-language series in Netflix history.

First-quarter revenue rose 10% to $7.87 billion, slightly below Wall Street’s forecast of $7.93 billion. Revenue is expected to increase another 10% in the next quarter compared to the second quarter of last year.

Last January, the streaming giant posted its slowest annual growth since 2015 and predicted its worst start to the year in 13 years due to a “Covid overhang”.

Investors wiped around $25bn (£18bn) from its market value in April last year when shares fell 11% in response to slowing subscriber growth.

That was before spiraling inflation raised the cost of living for consumers, who cut back on non-essential spending.

Kantar data shows that 215,000 Netflix, Amazon Prime and Disney+ accounts were terminated in the first quarter in the UK alone, as households braced for rising energy bills and the fallout from the rise in inflation.

Cancellations are expected to worsen, with the proportion of viewers planning to remove one of their streaming services to save money hitting a record high of 38%.

The company operates in an increasingly competitive market. Disney has now reached 196.4 million subscribers across Disney+, ESPN+ and Hulu as it continues to expand its market share globally.

Squid Game helped Netflix steady the ship last year when the South Korean dystopian drama became an unexpected global hit that led to a rebound in subscriber numbers.

To compete with Disney’s Star Wars and Marvel Universe franchise, the debt-ridden company bought Roald Dahl’s back catalog before making shows based on the late author’s work.

Netflix plans to create a slew of animations, movies, and theatrical production on its titles, which span Fantastic Mr Fox, The Twits, and The Witches.

During this time, the company moved into the video game business in an effort to diversify its revenue and attract subscribers more broadly.

Netflix struck a deal with development studio Night School last month to acquire Boss Fight Entertainment, the studio behind popular mobile game Dungeon Boss.