This Is Why Netflix Just Took a Major Hit

The top performing streaming service laid out some serious issues in their latest earnings report.

Thanks to the pandemic, there's a good chance you spent a decent amount of time binge-watching shows and movies on Netflix in the past year. The service now boasts more than 207 million subscribers globally, making it the most popular streaming option in the world. But during its latest earnings call, Netflix executives laid bare a set of major issues that could make the next year a difficult one for the company. Read on to see why the tech trailblazer just took a hit, and for more important streaming updates, check out If You See This Message on Your Roku, Report It Immediately, Experts Say.

Netflix's subscriber growth has slowed down much faster than anticipated.

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According to the company's earnings report released on Apr. 20, Netflix added just under 4 million more worldwide subscribers from January through March of 2020. But while that may seem like an impressive bit of growth, it actually marks the smallest gain during that three-month period in four years, CNBC reports.

The lag in new subscribers also marks a huge drop-off from the same time last year, which saw a record-breaking 15.7 million new signups for the company during the onset of the COVID-19 pandemic, The New York Times reports. The numbers also fall well short of the predicted number of signups the company had expected in the first quarter of the year by about 2 million.

The company's stock prices dropped hard on the news.

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Netflix also admitted that the problem might be an ongoing one in the coming months. The company slashed its growth predictions to just 1 million new subscribers from April through June, representing a stark drop from the 10 million new subscribers that the streaming service signed on during the same period in 2020, USA Today reports.

News of Netflix's sudden struggles to sign up new users sent shockwaves through the financial world. The company saw its stock prices fall as much as 11 percent in after-hours trading in response to the dire forecast, CNBC reports. And for more on streaming predecessors who have fallen on hard economic times, check out This Beloved Movie Theater Chain Just Filed for Bankruptcy.

Executives blame COVID for interrupting their production schedule.

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Some analysts were quick to blame increased competition for Netflix's woes. HBO Max, which launched in May of 2020, already hit its two-year goal of 41 million subscribers in January, Yahoo Finance reports. And Disney+ surpassed 100 million subscribers in March, taking just a year and a half to build a user base about half the size of Netflix's.

But Netflix executives argued that the pandemic was actually to blame, disrupting the company's content strategy by interrupting filming and release schedules for some of its most popular offerings. "We believe paid membership growth slowed due to the big COVID-19 pull forward in 2020 and a lighter content slate in the first half of this year, due to COVID-19 production delays," the company said in a letter to investors on Tuesday.

The return of popular shows will start bringing in new users soon, executives say.

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But company executives remained optimistic that the next few months would be the only difficult period for the streaming service. "We'll get back to much steadier state in the back half of the year," Ted Sarandos, Co-CEO and Chief Content Officer & Director for Netflix, said during the company's earnings call with investors.

He cited the return of many of the streaming service's most popular series in the coming months, such as The Witcher and You, as major potential draws for new subscribers, The Times reports. And for more on major business moves, check out This One Thing Is Disappearing From Walmarts Nationwide.

Zachary Mack
Zach is a freelance writer specializing in beer, wine, food, spirits, and travel. He is based in Manhattan. Read more
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