(News Bulletin 247) – The streaming service recorded fewer subscribers than expected in the first three months of the year. Netflix also announced a disappointing outlook for the current quarter. The action fell ahead of the stock market.

From one quarter to another, the performance of a company is particularly scrutinized, including that of Netflix. After having achieved a solid end to the year 2022 with subscriber recruitment exceeding market expectations, Netflix this time had a lackluster start to the year 2023.

The streaming service published Tuesday evening at the close of Wall Street revenues certainly up between January and March 2023, but below expectations as well as the pace of recruitment of new subscribers.

In the first quarter of the year, the streaming specialist recorded a slight increase in turnover over one year, to 8.16 billion dollars, just missing its own expectations of 8.18 billion dollars. . Netflix had indeed indicated that it wanted to generate revenues up 4% over one year in the first quarter of 2023, and 8% excluding exchange rate variations, on the sidelines of the publication of its fourth quarter results.

A small consolation prize, Netflix’s operating profit came out above market expectations at $1.7 billion.

The market welcomes the mixed results and prospects announced by the streaming giant with little enthusiasm. Netflix shares lost nearly 2% in pre-market after being shaken Tuesday evening in post-market trading. The title had then slipped by more than 12% before returning not far from equilibrium.

A less dynamic conquest of subscribers

On the side of the conquest of new subscribers, there too the disappointment is palpable. In the first three months of the year, the company only gained 1.75 million subscribers to its base, failing to meet analysts’ expectations which were targeting an average of 2.41 million subscribers according to Bloomberg. .

“Netflix added just 1.75 million new subscribers, 600,000 below Wall Street expectations, as the cost of departures squeezes budgets and households scrutinize their spending,” Josh said. Gilbert, market analyst at eToro.

Here too, the gain in new subscribers is down sharply compared to the fourth quarter. In the last months of 2022, the streaming service had added 7.66 million subscribers to its portfolio, driven by content such as the film Knives Out, Glass Onion [Glass Onion: une histoire à couteaux tirés, NDLR] and the surprise Addams Family spin-off, Wednesday [Mercredi en version française, NDLR].

In total, Netflix has 232.5 million subscribers worldwide. For Paul Verna, an Insider Intelligence analyst, quoted by AFP, these rather lukewarm figures do not prove that the company will be able to revitalize its activities with advertising and paid password sharing.

“With the hypergrowth phase receding, it’s difficult to be a Netflix investor. Its advertising arm, which launched in November, has yet to start delivering results and may take some time to have an impact. material” abounds on his side Josh Gilbert.

To accelerate its growth, the group was forced to reinvent itself. The streaming platform has announced various measures. Among these key measures, Netflix launched a new cheaper subscription in November, with advertising. In France this offer amounts to 5.99 euros per month against 13.5 euros for the standard version.

An alternative that he had always refused to study until then. But for more than two years, Netflix has had to deal with increasingly fierce competition, with Disney + in the lead, whose success is well established.

“Interest in this new formula exceeds our expectations,” Netflix said in its press release, “and we observe that very few existing subscribers are switching” to this less expensive offer. But for all that, “it seems that the implementation is very slow”, commented Jamie Lumley, analyst at Third Bridge, quoted by AFP. “Our experts are counting on 10 to 20 million subscriptions with advertising taken out per year, instead of the initial ambition of 40 million”.

Small ignition delay for the end of account sharing

The group also returned to its codeshare billing system. The company has indeed launched a fierce fight against the sharing of connections, that is to say when a user “borrows” identifiers from a subscriber to view content without having to pay the subscription. And this phenomenon represents a significant shortfall for Netflix.

For the moment, this measure has been launched in South America and more recently in Canada. The first feedback is quite positive. The company recorded unsubscriptions in the process, but subsequently observed a return from users. But the implementation of this measure risks penalizing the group’s growth in the coming months. “Some of the growth in subscribers and revenue will decline in the third quarter rather than the second, and we hope to see better results for both our subscribers and our business going forward,” Netflix said in a statement. its letter to shareholders.

For the rest of the world, the group preferred to postpone this end of account sharing to the second quarter when this measure was initially planned for the beginning of 2023. According to JPMorgan, partially ending these 100 million ” phantom accounts” would allow the group to accelerate its growth, increase its margins as well as its cash flow.

Netflix has also announced that it will bury its historic DVD rental service by mail launched 25 years ago by the end of the year. “Our goal has always been to provide the best service to our members but it has become very complicated with the decrease in this activity”, explained the company.

Note that Netflix no longer announces forecasts on its number of users after having diversified its activities. The group, however, said it expected second-quarter revenue of $8.2 billion, below consensus estimates of $8.47 billion.