After Netflix reported a loss of 200,000 subscribers in the first quarter, its share price plunged over 35%. But what does that mean for music?
Paired with a steep decline from a subscriber warning during its Jan. 20 earnings release, Netflix’s share price has fallen 62.5% year to date and stands 67.7% below its all-time high of $700.99 set on Nov. 17, 2021.
Warnings lights flashed around the business world after Netflix revealed Tuesday it lost 200,000 subscribers in the first quarter — it had forecast a 2.5-million subscriber gain — and expects to shed another 2 million in the second quarter. After a COVID-19-related surge in customer acquisitions, Netflix succumbed to the pressures of new competition, high inflation and the loss of 700,000 subscribers from ceasing operations in Russia.
Netflix’s management also laid part of the blame on account sharing: While Netflix has 220 million paying households, the company estimates its product is shared with an additional 100 million households, including 30 million in the U.S. and Canada alone. Account sharing is not a new problem, but Netflix believes its inability to grow in some markets was obscured by COVID-19 growth.
For most of its history, Netflix has been able to steadily increase the price of its on-demand streaming service with little to no impact on churn and growth. But with heavy competition from new competitors, which launch with low prices to attract customers, Netflix is embracing affordability. On Wednesday, Netflix’s management suggested the company may offer a low-cost tier with advertisements — an option it has avoided for years.
Wednesday’s 10.9% drop in Spotify’s share price shows investors’ worries about the growth of streaming entertainment extends beyond Netflix. But there are several reasons why music services don’t suffer from the same pressures facing SVOD services. Netflix, HBO Max, Disney+ and Apple TV+ differentiate themselves almost solely on the television series and motion picture content they carry.
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