Netflix is scrambling to adjust expectations and stay within budget for the next year, amid a historic loss of subscribers.
The streaming giant plans to significantly reduce its content offerings and cut expenses after a nightmare first quarter earnings report this week.
In the first three months of 2022, Netflix lost 200,000 subscribers, falling far short of the 2.5 million gain it had projected. It expects to lose 2 million more in the current quarter.
The company’s stock plunged almost 38% on Wednesday after the announcement and is down another 5% in midday trading on Thursday.
“Well, it’s a bitch,” Netflix co-CEO Reed Hastings told employees at a town hall on Wednesday about the decline in subscribers, as reported by the Wall Street Journal.
In a letter to investors, company executives said that growing competition from other streaming services, password sharing between different households, a slow rollout of smart TVs, and larger macroeconomic factors such as inflation and Russia’s invasion of Ukraine are to blame for the subscriber loss.
Netflix’s revenue primarily comes from subscriptions, and the losses sustained over the past few months are making investors skittish. In response, executives are scrambling to reignite growth.
On a Tuesday call with investors, Hastings revealed that the streaming service is exploring implementing a lower-priced subscription tier that would include ads, a massive change from its existing no-ad plans. The company is also considering how to monetize password sharing between households.
Finally, the company plans to reduce the amount of available programming in its library, instead focusing more on quality rather than quantity.
Despite the losses, Netflix remains ahead of other streaming competitors thanks to its huge subscriber base of over 220 million. Growth also remains relatively strong outside of the U.S., where foreign titles including Spain’s Money Heist and South Korea’s Squid Game and All of Us Are Dead became top hits for the service.