As more competition starts to emerge, Netflix has been struggling to retain its impressive subscriber growth numbers. Shareholders have panicked as Netflix reported much lower subscriber growth for the final quarter of 2021, plummeting the stock by more than 20 percent. Three months ago Netflix had forecasted that it would report 222.06 million paid subscriptions by the end of last year. They hit a total of 221.84 million subscribers – while it doesn’t appear to have missed by miles, investors were already concerned before the latest numbers were published, which has now obviously been compounded.
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In its filing, Netflix also reported that it is expecting modest growth for the next quarter as well. It is only expecting to add about 2.5 million subscribers in the first quarter of 2022, which is down significantly from the 4 million subscribers they added in the same period last year. That being said, their product is extremely sticky and attrition is relatively low.
Netflix revenue grew 16 percent year-over-year, while paid memberships rose 9 percent. Investors’ biggest concern has been its home market of the United States, where growth has slowed to a crawl in recent years. It is the company’s biggest market, but it is also highly saturated. As previously mentioned, its competition is also making large inroads – the likes of Disney+, HBO Max, Hulu, Amazon Prime, Apple TV+, and more have been growing a lot quicker.
“While retention and engagement remain healthy, acquisition growth has not yet re-accelerated to pre-Covid levels,” the company said. “We think this may be due to several factors including the ongoing Covid overhang and macro-economic hardship in several parts of the world like Latin America.”
“While this added competition may be affecting our marginal growth some, we continue to grow in every country and region in which these new streaming alternatives have launched,” the company wrote. “This reinforces our view that the greatest opportunity in entertainment is the transition from linear to streaming and that with under 10% of total TV screen time in the US, our biggest market, Netflix has tremendous room for growth if we can continue to improve our service.”
