Business

Is the party over? “For now, we’re just like staying calm,” Netflix co-Founder Reed Hastings told investors

Even as Netflix executives sought to reassure investors in a Thursday video interview that its long-term prospects for streaming media remain bright, with its popular series Bridgerton returning for a second season and a science-fiction film starring Ryan Reynolds coming soon, shares slipped.

By the end of the 45-minute earnings interview, Netflix stock was down more than 20%, casting a pall over the entertainment industry. Wall Street analysts and the company’s own executives struggled to explain why the world’s dominant streaming service forecast modest growth for the first three months of 2022, when many had anticipated a return to predictable, pre-pandemic quarterly gains.

READ ALSO: Latin America surpasses the U.S. and Europe and is already the second-fastest-growing streaming market in the world

“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.”

Of 221.8 million subscribers reached at the end of 2021, 39.6 million are in Latin America. Despite generating less revenue per member than other regions, Latin America was the market in which Netflix grew the most in the last quarter: 14%. The region’s figures also show that Netflix is recovering in Latin America, after a slump in late 2020.

Pivotal Research Group analyst Jeff Wlodarczak said Netflix and other services that added subscribers during the pandemic lockdown in early 2020 – including Disney Plus – are struggling to regain equilibrium after outsized gains.

Streaming is not over, it is the future,” Wlodarczak wrote. “And today, streaming still has a relatively small percentage of global television viewership.”

Stocks of tech and media companies that have invested heavily in streaming, including the Walt Disney Co, ViacomCBS, and Roku, all dropped in after-hours trading.

Netflix projected gains of 2.5 million subscribers in the January through March quarter, roughly two-thirds of the 4 million customers added in the same period a year earlier. Wall Street analysts pointed to heightened competition and a slower-than-anticipated return to normalcy after the distortions of the pandemic as possible factors.

READ ALSO: Netflix earnings will be the first ones to come out, setting the pace for 2022 streaming wars

Others saw Netflix’s muted first-quarter forecast as a sign of intensifying competition – though co-CEO Ted Sarandos told investors: “We didn’t see a hit to our engagement. We didn’t see a hit to retention – all of those things that would classically lead you to looking at competition.”

Rival services, such as Disney‘s Disney Plus, WarnerMedia‘s HBO Max, and Amazon Prime Video, are spending billions on content to attract subscribers.

“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.”

Though 90% of Netflix’s growth is expected to come from outside its home market, analysts are closely tracking how Netflix’s latest price increase, which boosted the cost of a monthly subscription to $15, will affect subscriptions in the United States and Canada.

READ ALSO: Analysis: The upsides and (headaches) of Microsoft’s $68 billion deal with Activision Blizzard

“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, an analyst at Third Bridge, “as we head into a 2022 year that many seem to believe will come with streaming video subscriber saturation overall.”

Netflix co-Founder Reed Hastings told investors there’s ample room for growth, as streaming gradually replaces traditional television over the next decade or two.

“For now, we’re just like staying calm,” he said.

This post was last modified on January 21, 2022 10:28 am

Share
Published by
Reuters

Recent Posts

Pix revolution: collaboration between the Brazilian Central Bank and the local financial market was crucial for Pix’s creation

Part of Pix's success is based on the alignment between the objectives of the Central…

June 28, 2022

Pix revolution: how instant payment put Brazil at the forefront of global financial innovation

Spearheaded by the Brazilian Central Bank, Pix's launch is an example of how innovation can…

June 20, 2022

Time to market: how to connect the dots

Time to Market has been a great ally of startups to bring in investors, but…

June 19, 2022

Appmax grows sevenfold helping customers beat fraud and ‘digital bureaucracy’

Founded in 2018 by brothers Betina and Marcos Wecker, the company saw the number of…

June 19, 2022

US-based Sezzle debuts in Brazil with its BNPL solution for small and medium-sized businesses

Fintech sees the country as a gateway to the growing BNPL market in Latin America

June 15, 2022