Netflix’s ten-year success has finally hit a wall, and the subscriber base may be lost at an accelerated rate – yqqlm

After a decade of blistering growth that completely upended Hollywood, Netflix has hit a southern wall.

The streaming company announced Tuesday that it lost 200,000 subscribers in the first quarter, its first loss of subscribers since 2011. Netflix also expects to lose another 2 million subscribers in the current second quarter, making it its worst year since the company went public.

Investors, analysts and Hollywood executives are bracing for a sluggish start to the year, but Wall Street still expects Netflix to add 2.5 million subscribers. Netflix shares, which have fallen more than 40% this year, fell as much as 24% to $265.11 in after-hours trading following the report.

Netflix management pointed to four reasons, including the prevalence of account sharing and increased peer competition. In addition to 221.6 million paying subscribers, 100 million households use its service without paying, the company said. The company is experimenting with ways to get those viewers to sign up.

“Our relatively high household penetration, combined with competition, is a headwind to our revenue growth if we count households with a large number of shared accounts,” management wrote in a letter to shareholders.

This outcome will affect all major entertainment companies. U.S. entertainment giants have merged and restructured to take on Netflix in the streaming space after seeing millions of subscribers ditch pay-TV for streaming. Investors encouraged this strategic shift, buying shares in companies that are vigorously developing their streaming businesses, such as Disney (131.9, 4.13, 3.23%).

Netflix had previously forecast subscriber growth of 2.5 million in the first quarter, roughly in line with Wall Street expectations. For the current second quarter, analysts expect an increase of 2.43 million subscribers.

Outside the U.S., Netflix is ​​still far ahead of most of its competitors and is the world’s largest streaming service. The company believes it can get out of the current woes by introducing better programming to attract new customers and find more ways to charge existing users. Whether Wall Street believes them remains to be seen.

Netflix’s first-quarter revenue rose 9.8% to $7.87 billion, missing analysts’ expectations. However, earnings per share of $3.53 were significantly higher than analysts’ expectations of $2.91.

Netflix expects revenue to rise 9.7% to $8.05 billion and earnings of $3 per share for the quarter. Wall Street’s forecast was for revenue of $8.23 billion and earnings per share of $3.02.