Netflix faces first quarter fallout, tries to reel back profits

Hailey Chin

After it revealed a loss in subscribers in its first quarter report of the year, Netflix Inc. saw its stocks drop as investors worry about the future of the entertainment streaming service.

Netflix was launched on Aug. 29, 1997 by Reed Hastings and Marc Randolph and first became popular as a DVD-by-mail service with fast delivery and no fees. Since it added the option in 2007 to stream movies and television shows online, the company is currently worth around $95 billion, according to Fortune.

During the pandemic, with movie theaters closed and many people staying in their homes, Netflix saw a surge in subscriptions, gaining 36 million subscribers in 2020, according to Statista.

However, the growth that Netflix enjoyed since then is steadily decreasing as many pandemic related restrictions have been lifted and people are no longer confined to their homes.

“Food and energy are people’s priorities right now, not watching ‘Stranger Things,’” Michael Hewson, the chief market analyst for financial service company CMC Markets, told CNN.

Netflix announced a loss of 200,000 subscribers, marking the first time the company has lost this many in over a decade and giving cause for concern.

The company claims that these losses were due to a variety of reasons, such as password sharing among households and competition, with traditional cable, broadcast television and other new streaming services entering the market. Other streaming platforms include The Walt Disney Co.’s Disney+, Inc.’s Amazon Prime Video and Apple Inc.’s Apple TV+. Additionally, Netflix is blaming Russia’s invasion of Ukraine for the decline too.

Netflix does not plan to take any action against password sharing, as it is more likely to have benefited the company.

“Sharing likely helped fuel our growth by getting more people using and enjoying Netflix,” the company said in its shareholder letter for its first quarter. “And we’ve always tried to make sharing within a member’s household easy, with features like profiles and multiple streams.”

To counter this drop, Netflix also canceled several notable projects, including Roald Dahl’s “The Twits” and “Bone.”

The cancellations of these series caused their creators to speak out against Netflix. Some even called the company’s process “manipulative.”

Elizabeth Ito, who created the “City of Ghosts” animated series and has been a part of the animation industry for fifteen years, claims to have been shown “staged data” as the reasoning behind the cancellation of her show. A producer asked questions about the data they received and acquired new data that backed Netflix’s decisions, according to a reporting from Yahoo News.

Netflix also plans to push forth a lower priced version of its service that has advertising. This is a plan Hastings, who is also a co-CEO, is against.

“Those who have followed Netflix know that I’ve been against the complexity of advertising and a big fan of the simplicity of subscription,” Hastings said on the call, according to Bloomberg.

Netflix stocks dropped 35% after this announcement, as people doubt the future of the streaming platform.

This drop in subscribers likely means Netflix will need to reevaluate its service and expand its library to appeal to different audiences. The cancellations and removals of popular series such as “The Office” on its platform could further contribute to drops in subscriptions. The way Netflix handles this incident will undoubtedly have substantial influence over the company’s future.