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<\/a><\/p>\nFour Causes<\/strong><\/p>\n Management pointed to four causes, including the prevalence of password sharing and growing competition. The company said there are more than 100 million households that use its service and don\u2019t pay for it, on top of its 221.6 million subscribers. The Los Gatos, California-based company is experimenting with ways to sign up those viewers, such as asking people who are sharing someone else\u2019s account to pay more.<\/p>\n \u201cIt allows us to bring in revenue for everyone who is viewing for gets value from entertainment we\u2019re offering,\u201d chief operating officer Greg Peters said during an interview with analyst Doug Anmuth of JPMorgan Chase & Co.<\/p>\n Netflix\u2019s troubles are a warning sign for its peers and competitors. After watching millions of customers abandon pay TV for streaming, US entertainment giants merged and restructured to compete with Netflix. Investors encouraged this strategic shift, boosting shares of companies like Walt Disney Co that demonstrated a commitment to streaming.<\/p>\n Investors have begun to question whether some of these media companies will sign up enough customers to justify all the money they are spending on fresh programming.<\/p>\n Disney fell as much as 5.2% in extended trading after Netflix reported its outlook, while Warner Bros. Discovery Inc, the owner of HBO Max, declined as much as 2.8%. Shares of Roku Inc, the maker of set-top boxes for streaming, dropped as much as 8.3%.<\/p>\n All of these competitors offer advertising-supported services, or are planning to do so in the near future. Analysts and competitors have speculated that Netflix would offer advertising for years, only to be rejected by Hastings.<\/p>\n Netflix always said its viewers preferred its service over cable TV because there were no ads. Hastings also didn\u2019t want to compete with Google and Facebook in selling ads online. Yet he has finally relented.<\/p>\n \u2018Makes Sense\u2019<\/strong><\/p>\n \u201cAllowing consumers who would like to have lower price and are ad tolerant makes a lot of sense,\u201d Hastings said Tuesday. Netflix will explore the best way to offer advertising over the next couple of years.<\/p>\n Cracking down on password sharing is a risk for a company that started by giving customers a cheaper, more convenient alternative to cable. By nudging customers to pay – and inserting advertising – Netflix begins to resemble what it replaced.<\/p>\n But the company needs help after losing customers in three of its four regions in the first quarter, including more than 600,000 in the US and Canada.<\/p>\n Netflix blamed most of that on a price increase, and said the decline was expected. Russia\u2019s invasion of Ukraine cost the company another 700,000 customers when it had to pull its service in Russia, resulting in a loss of 300,000 customers in the Europe, Middle East and Africa.<\/p>\n Overall, Netflix had forecast subscribers would grow by 2.5 million in the first quarter, roughly in line with Wall Street estimates. For the current period, analysts were predicting gains of 2.43 million. First-quarter revenue grew 9.8% to $7.87 billion, missing analysts\u2019 estimates.<\/p>\n Profit, at $3.53 a share, easily topped projections of $2.91.<\/p>\n No Explanation<\/strong><\/p>\n \u201cThey were never able to explain why or how growth was slowing,\u201d Nathanson said. \u201cNow they\u2019ve decided growth is slowing. How did this change in two quarters?\u201d<\/p>\n Asia was the lone bright spot. Netflix added more than 1 million customers in the region, buoyed by popular new titles such as the South Korean drama \u201cAll of Us Are Dead.\u201d<\/p>\n Netflix remains well ahead of most of its competitors outside the US, and is the largest streaming service in the world. The company believes it can execute its way out of the current predicament by luring new customers with better programs and finding more ways to charge its existing user base. The company still expects to add customers this year, and will have a stronger slate of new shows in the back half of the year.<\/p>\n
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