Netflix sheds subscribers for the first time in a decade

Netflix shares fell more than 20 per cent on Tuesday after it warned its decade-long run of subscriber growth had ended in the first quarter and admitted that it is becoming “harder to grow membership” in many markets.

The streaming pioneer also said the number of subscribers would fall by another 2mn in the current quarter, to about 219.6mn, after declining by about 200,000 in the first quarter. Investors had expected an increase of 2.6mn subscribers.

Netflix blamed the slowdown in part on signs of saturation in its major markets. But it also acknowledged the impact of rising competition from streaming services launched by traditional media groups such as Disney, Warner Bros Discovery and Paramount.

“Our relatively high household penetration — when including the large number of households sharing accounts — combined with competition, is creating revenue growth headwinds,” it said in a statement.

Netflix acknowledged that its revenue growth has “slowed considerably”. In the first quarter Netflix’s revenue grew 10 per cent to $7.8bn, below Wall Street expectations of $7.9bn. Earnings of $3.53 a share were ahead of projections.

The company said it would try to stimulate growth by improving the “quality of our programming and recommendations” and by seeking to charge some of the 100mn households that share other users’ accounts.

Some analysts were looking for Netflix to get a boost this spring from new episodes of hit series such as Stranger Things and Ozark.

It also emphasised the importance of international growth. “While hundreds of millions of homes pay for Netflix, well over half of the world’s broadband homes don’t yet — representing huge future growth potential,” the company said.

Netflix raised prices this year in the US and Canada, which cost it about 600,000 subscribers but was “significantly revenue positive”, the company said. It also quit streaming in Russia after the invasion of Ukraine, costing it about 700,000 subscribers.

This is the second time Netflix has surprised investors this year, after jolting the markets with its forecast that subscriber growth would slow significantly in 2022. Its shares are down 42 per cent this year.