Netflix and spill: Stock takes a drubbing as subscribers bolt

SAN FRANCISCO — A sharp drop in subscribers sent Netflix shares into freefall Wednesday, forcing the company to consider experimenting with ads and cracking down on millions of freeloaders who use passwords shared by friends or family.

Netflix’s customer base fell by 200,000 subscribers during the January-March quarter, the first contraction the streaming service has seen since it became available throughout most of the world six years ago.

The drop stemmed in part from Netflix’s decision to withdraw from Russia to protest the war against Ukraine, resulting in a loss of 700,000 subscribers. Netflix projected a loss of another 2 million subscribers in the current April-June quarter.

The steep erosion, which follows a year of slower growth, gave Netflix investors major jitters. The company’s stock took a beating Wednesday, shedding more than 35% to close at $226.19. The stock closed at $348.61 Tuesday before its news release.

The selloff wiped out nearly two-thirds of the streamer’s market value since the end of last year, erasing $170 billion in shareholder wealth in less than four months.

Looming changes announced late Tuesday are designed to help Netflix regain momentum lost over the past year as pandemic lockdowns have lifted and deep-pocketed rivals such as Apple and Walt Disney have begun to chip away at its vast audience with their own streaming services.

The impact on current Netflix customers won’t be clear for a while. To David Lewis in Norwalk, Connecticut, it’s doesn’t seem like a big deal. Lewis shares a premium plan with his three adult children and some of their friends and says they will keep it, even if they have to cut off the friends and each pay for their own accounts.

“We would keep Netflix and pay for the four in our family, even if it was more,” he said. “We love the service and what it offers.”

The Los Gatos, California company estimated that about 100 million households worldwide are watching its service for free by using the account of a friend or another family member, including 30 million in the U.S. and Canada.

“Those are over 100 million households already are choosing to view Netflix,” Netflix CEO Reed Hastings said. “We’ve just got to get paid at some degree for them.”

To prod more people to pony up, Netflix indicated it will expand a trial program it’s been running in Chile, Costa Rica and Peru where subscribers can extend service to another household for a discounted price. In Costa Rica, Netflix plan prices range from $9 to $15 a month, but subscribers can openly share their service with another household for $3.

Netflix offered no additional information about how a cheaper ad-supported service tier would work or how much it would cost.