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Netflix: Shares crater on sluggish growth

January 21, 2022

Netflix lost up to 20 per cent of its value as it reported the subscriber base grew to 222 million in 2021, but admitted it is facing an uncertain future as the surge of interest it saw during the pandemic continues to wane.

Netflix added 18.2 million subscribers in total last year – around half the number who signed-up in 2020. The news saw shares plummet in after-hours trading.

In a letter to shareholders, Netflix said: “We achieved several milestones in 2021: we had the biggest TV show of the year (Squid Game), our two biggest film releases of all time (Red Notice and Don’t Look Up) and Netflix was the most Emmy-winning and most nominated TV network and the most Oscar-winning and nominated movie studio of 2021. Full year revenue of $30 billion (€26.4bn) grew 19 per cent year over year while operating income of $6.2 billion rose 35 per cent year over year. We finished Q4 with 222 million paid memberships (with 8.3 million paid net adds in Q4). Even in a world of uncertainty and increasing competition, we’re optimistic about our long-term growth prospects as streaming supplants linear entertainment around the world. We’re continually improving Netflix so that we can please our members, grow our share of leisure time and lead in this transition.

For Q1 2022, Netflix forecasts paid net adds of 2.5 million vs 4 million in the year ago quarter. Netflix said the guidance reflects a more back-end weighted content slate in Q1 2022 (for example, Bridgerton Season 2 and new original film The Adam Project will both be launching in March). In addition, while retention and engagement remain healthy, acquisition growth has not yet re-accelerated to pre-Covid levels. Netflix believes this is due to
several factors including the ongoing Covid overhang and macro-economic hardship in several parts of the world like Latin America.

“Consumers have always had many choices when it comes to their entertainment time – competition that has only intensified over the last 24 months as entertainment companies all around the world develop their own streaming offering,” the company added. “While this added competition may be affecting our marginal growth some, we continue to grow in every country and region in which these new streaming alternatives have launched.”

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