The reasons behind the fall of the Netflix house - Companies

The reasons behind the fall of the Netflix house – Companies

In my opinion, Reed Hastings, the brilliant founder of Netflix will long remember this Wednesday, April 20. It’s normal, his company lost 37% of its stock price in a single day, the equivalent of 50 billion dollars in valuation that went up in smoke… It’s crazy!

In total, since the beginning of the year, the Netflix action will have lost 60% of its value and this streaming company, which was worth 300 billion dollars on the stock market last fall, is worth more today than 100 billion. Why did Netflix experience this descent into hell this Wednesday, April 20? But because the company disappointed investors. For the first time in ten years, Netflix has lost subscribers. The loss is not huge, barely 200,000 subscribers out of a total of 221 million subscribers worldwide.

You will tell me that it is far from being serious. However, for investors, it is serious, because the management of Netflix had planned to have 2.5 million additional subscribers. Instead, management announces not only a loss of 200,000 subscribers but in addition, it estimates that it will lose another 2 million during this spring. Whose fault is it ? Good question indeed. And there, we have a choice, the simplest explanation is to say that it is because of Russia. And it is true that in reaction to the invasion of Ukraine, Netflix suspended its services in Russia, without this suspension Netflix would have had 500,000 additional subscribers.

But Ukraine does not explain everything, as Netflix is ​​also losing subscribers in its main market in the United States. And here we come to the second reason: the competition in streaming video is fierce, giants like Disney, Amazon or Apple also have their own services, and the cake is not infinitely expandable.

But the real reasons for Netflix’s stock market loss lie elsewhere. And in particular the fact that 100 million people watch Netlfix without paying via password sharing. Until now, Netflix management was not too concerned about this fraud, but now it is. Netflix is ​​therefore testing in 3 South American countries a measure to limit the sharing of accounts, in other words, by asking users to pay 3 dollars more per month to be able to share their password outside the family home.

But the most drastic change, I almost said the most revolutionary, is that Reed Hastings is ready – although he has always been against – to introduce targeted advertising on Netflix. In other words, it will offer households that want it a subscription at a very low price but offset by targeted advertising. It will take two years to put this in place, but this measure is supposed to revive the cash machine that is Netflix.

But rest assured Netflix is ​​not bankrupt, the proof, the world video champion will invest 20 billion dollars, in 2022, in new cinematographic productions. Streaming is far from dead, it’s just a little slimming cure for investors but not for subscribers.

In total, since the beginning of the year, the Netflix action will have lost 60% of its value and this streaming company, which was worth 300 billion dollars on the stock market last fall, is worth more today than 100 billion. Why did Netflix experience this descent into hell this Wednesday, April 20? But because the company disappointed investors. For the first time in ten years, Netflix has lost subscribers. The loss is not huge, barely 200,000 subscribers out of a total of 221 million subscribers worldwide. You will tell me that it is far from being serious. However, for investors, it is serious, because the management of Netflix had planned to have 2.5 million additional subscribers. Instead, management announces not only a loss of 200,000 subscribers but in addition, it estimates that it will lose another 2 million during this spring. Whose fault is it ? Good question indeed. And there, we have a choice, the simplest explanation is to say that it is because of Russia. And it is true that in reaction to the invasion of Ukraine, Netflix suspended its services in Russia, without this suspension Netflix would have had 500,000 additional subscribers. But Ukraine does not explain everything, because Netflix is ​​also losing subscribers in its main market in the United States. And here we come to the second reason: competition in streaming video is fierce, giants like Disney, Amazon or Apple also have their own services, and the cake is not infinitely expandable. But the real ones reasons for Netflix’s stock market loss lie elsewhere. And in particular the fact that 100 million people watch Netlfix without paying via password sharing. Until now, Netflix management was not too concerned about this fraud, but now it is. Netflix is ​​therefore testing in 3 South American countries a measure to limit the sharing of accounts, in other words, by asking users to pay 3 dollars more per month to be able to share their password outside the family home. But the most drastic change, I almost said the most revolutionary, is that Reed Hastings is ready – although he has always been against – to introduce targeted advertising on Netflix. In other words, it will offer households that want it a subscription at a very low price but offset by targeted advertising. It will take two years to put this in place, but this measure is supposed to revive the cash machine that is Netflix. But rest assured Netflix is ​​not bankrupt, the proof, the world video champion will invest 20 billion dollars, in 2022, in new cinematographic productions. Streaming is far from dead, it’s just a little slimming cure for investors but not for subscribers.

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