Newsletter 20th of April
20 April 2022
This week, we focus on Netflix’s Q1 2022 report:
- Netflix posts first customer loss in a decade
- Netflix boosts advertising trend
Netflix posts first customer loss in a decade
On Tuesday, Netflix commenced the Q1 earnings reports season – with somewhat of a shocker.
Mediavision will soon publish the latest analysis of the Nordic streaming market. A sneak peek reveals that in the Nordics, Netflix’s subscriber growth has remained stable year over year. Despite some regional variances, no general change in number of subscribers can be found. On a global scale, however, Netflix’s earnings report paints a different picture.
According to the company shareholder letter for Q1 2022 released yesterday, Netflix lost 200.000 customers in the quarter – the first decline in a decade. The company expects to lose an additional 2 million customers in Q2. In January 2022, Netflix reported that it had 221.84 million subscribers at the end of 2021. Netflix now says this figure fell to 221.64 million subscribers in Q1 2022. Netflix cites increasing competition, macro factors (including sluggish economic growth and increasing inflation) and password-sharing as drivers behind the subscriber loss. Netflix estimates that there are more than 100 million people viewing the service without paying for it. While this share has remained stable over the years, coupled with other factors outside of Netflix’s direct control (like uptake of connected TVs and adoption of on-demand entertainment), it does hinder growth in addressable markets.
Netflix said that not accounting for the losses in Russia – where Netflix has cut services in response to the country’s invasion of Ukraine – it would have added 500,000 subscribers in Q1. However, this is still far from the 2.5 million paid net adds the company expected to gain in Q1 2022.
In terms of its Q1 financial results, Netflix beat Wall Street’s expectations for earnings but lost on revenue. EPS amounted to USD 3.53 vs. USD 3.75 a year ago (including a USD 162 million non-cash unrealized gain from F/X remeasurement on Netflix’s Euro denominated debt). Revenue grew by 10% to USD 7.87 billion.
Netflix’s shares fell as much as 27% to USD 254 in extended trading, following the news. Other streaming stocks such as Spotify and Disney also tumbled in the after-hours market following Netflix’s Q1 update.
A recent survey in CNBC shows that due to inflation rising, 35% of Americans have cancelled a monthly subscription in the past six months to rein in their spending. Plus, 36% of respondents will cancel a subscription if the higher prices persist. And according to Kantar, British households have cancelled about 1.5 million streaming accounts in Q1 2022. This could indicate that Q1 reports from other streaming actors will reveal disappointing figures on subscriber growth.
This analysis covers both the and TV- and streaming markets in the Nordic countries. It rests on three pillars: the consumers, the market, and the actors. Analysing the consumers takes us far – but not all the way. Studying the actors and the market as a whole is just as important.
Netflix boosts advertising trend
In the investor call on Tuesday, Netflix’s Co-Chief Executive Officer Reed Hastings shared the company plans to create a lower-priced version of the service that includes advertising – a significant strategy shift for the company. The company will work on creating an ad-supported version of the streaming service over the next year or two.
“Those who have followed Netflix know that I’ve been against the complexity of advertising and a big fan of the simplicity of subscription,” Hastings said on the call. “I’m a bigger fan of consumer choice and allowing consumers who would like to have a lower price and are advertising tolerant to get what they want, makes a lot of sense.”
With both Disney and YouTube recently announcing new AVOD tiers to their services, this could now definitely be considered a trend. And there are funds to go after. In 2021, IAB reported that global advertising revenue for digital video rose 50% year over year to a total of USD 39.5 billion.
In other AVOD-related news:
- FIFA has debuted its own streaming service FIFA Plus. More than 40 000 games will be streamed on the service in 2022, in addition to content from the ‘FIFA Plus Archive’. The service is ad supported for now, but FIFA says that they might charge for content in the future.
- On April 27th, Amazon will rebrand IMDb TV to Freevee in a move to highlight that the service is free of charge, and better distinguish it from the IMDb website. Freevee also plans to grow its slate of originals significantly in 2022.
Mediavision in the News
Globalt tapp för streaming – så kan Telia och Nent drabbas – Dagens Industri
Kun få danskere forventes at opsige Netflix efter prisstigning – Flatpanels
Netflix faces Nordic challenges – Broadband TV News
Swedish music subscriptions grew 7% in 2021 – High Resolution Audio
Så mycket dyrare har det blivit att strömma film och serier – SVT
Tufft år för svenska ljudboksbranschen – tillväxttakten halverades – Dagens Industri
Could TikTok spur growth of AVOD in the Nordics? – Senal News
Bråket visar varför Spotify behöver Rogan – SVD
Poddarna – makten och pengarna – SR
Därför kom Clubhouse-hysterin för ett år sedan – och därför dog den – SR
Hushållen tecknar fler abonnemang – rekordsiffror för S-SVOD under 2021 – Dagens Media
NEM Dubrovnik: 6-9 June 2022, Dubrovnik, Croatia
* Mediavision will attend
** Mediavision will present