When incompetent journalism has financial consequences…

22 April 2022
Netflix booth San Diego Comic-Con

Netflix booth at the 2017 San Diego Comic-Con International at the San Diego Convention Center in San Diego, California. / Gage Skidmore

Two days ago, Netflix posted its first quarter results for this financial year. The share price plunged 31,5% — the biggest one day fall in over a decade.

If you want to know why, consider these headlines:

  • Netflix Loses 200,000 Subscribers, Counts Password-Sharing as Contributing Factor — Netflix loses subscribers for the first time in 10 years CNET
  • Netflix Explores a Version With Ads as Subscriber Base Shrinks — Company ends first quarter with 200,000 fewer subscribers… Wall Street Journal
  • Netflix just lost subscribers for the first time in over a decade Company admits it’s getting harder to grow, says password sharing is partially to blame The Verge
  • Why Netflix is suddenly losing subscribersReed Hastings used to have streaming to himself. That’s over now . — Vox
  • Netflix’s Subscriber Loss Has Destroyed Employee Morale A record decline in Netflix's share price has shaken employees’ confidence in the company’s long-term trajectory Bloomberg

What none of these bastions of mainstream media pointed out in their headlines is that as a result of Joe Biden’s sanctions, Netflix was forced to pull out of Russia. Netflix had 700 000 paying subscribers in Russia.

If Netflix had not been forced to pull out of Russia, the company would have recorded 500 000 new subscribers. As it stands, the 500 000 new subscribers offset the 700 000 lost Russian subscribers, thereby causing Netflix’s first “decline” in a decade.

And all it would have taken is for these headlines to have read: “Netflix gains 500 000 subscribers but forced to lose 700 000 in Russia”.

Of course, there’s more to it.

  • Netflix has been toying with woke virtue signaling (which always is a turn-off for audiences);
  • Real life has returned (which means more people are going back to an office instead of work from home);
  • Nearly all of the western world has been hit with record inflation (which means less discretionary money in people’s pockets to spend on entertainment)

But those flags affect most of the current streaming services. I expect many Republicans are cancelling Disney+ subs as a result of the company’s ill-advised decision to weigh in on a contentious political issue. New streaming service CNN+ shut down barely a month after being launched.

I think Netflix’s fundamentals are sound. They’re global leaders and streets ahead in numbers still. They’ve been steadily adding local content in global markets. Their established base of own content is always going to be bigger than other streamers simply because competitors cannot match five years of inventory production in shorter periods.

Disclaimer: I’m not a Netflix shareholder.

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