For the first time in almost a decade, the number of Netflix customers has decreased.
According to the company’s announcement on Tuesday, the streaming service lost 200,000 customers in the first three months of the year.
The falls occurred when the company boosted pricing in major regions such as the United States and the United Kingdom while exiting Russia.
However, Netflix has warned that more losses are on the way, and it has signaled that as it rushes to sign up new subscribers, it will begin to tighten down on account sharing.
Reed Hastings, the boss, stated: “Working on [account sharing] wasn’t a top priority when we were growing quickly. And now we’re putting in a lot of effort into it.”
Netflix stated in a letter to shareholders that a boost in sign-ups during the outbreak “obscured the picture.”
It cautioned investors that another two million members were anticipated to cancel in the three months leading up to July.
“As our results and projection below illustrate, our sales growth has slowed significantly,” the business stated as it presented its quarterly results.
“Competition, combined with our relatively high household penetration – when factoring the significant number of homes sharing accounts – is causing revenue growth hurdles.”
In October 2011, the firm lost members for the first time in a quarter. It still has over 220 million subscribers worldwide.
Netflix lost 700,000 members as a result of its decision to leave Russia during the Ukraine conflict, according to the company.
According to Netflix, another 600,000 customers in the United States and Canada have canceled their subscriptions as a result of the price rise.
Despite the cancellations, Netflix stated the move was “in line with expectations” and will result in greater revenue.
The company’s sales increased 9.8% to more than $7.8 billion (£6 billion) in the first three months of this year compared to the same period last year.
Profits dropped more than 6% to $1.6 billion, indicating a downturn from previous quarters.
Sign-ups from other countries, such as Japan and India, helped to offset losses in the quarter.
As it seeks to expand, the company said it is concentrating on overseas markets and figuring out how to reach the estimated 100 million individuals who share household accounts, including more than 30 million in the United States and Canada.
Customers that share accounts with relatives or friends will be targeted for advertising and will generate income for the firm.
Mr Hastings stated, “Those who have followed Netflix know that I’ve been against the complication of advertising and a huge admirer of the simplicity of membership.” “However, as much as I support it, I am a larger supporter of consumer choice.”
Mr. Hastings stated that ad-supported services are “quite clear” for Disney and HBO.
However, economists claim that growing expenses are beginning to put a strain on consumers.
According to statistics from market research firm Kantar, families in the UK cancelled more than 1.5 million streaming subscriptions in the first three months of the year, with 38 percent claiming they wanted to save money – the highest proportion ever.
Netflix is also up against a lot of competition, with companies like Amazon and Apple, as well as conventional media corporations like Disney, investing heavily in their online streaming services.
The loss of customers was a “reality check,” according to Paolo Pescatore, an analyst at PP Foresight, as the firm strives to strike a balance between maintaining consumers and increasing income.
“While Netflix and other services were critical in the shutdown, people are now reconsidering their purchase decisions based on shifting habits,” he added.
He went on to say that North America is “today inundated with too many services chasing too little bucks.”
Following the revelation, the company’s stock dropped more than 20% in after-hours trading in New York, knocking more than $30 billion off its market value.
Shares of other entertainment companies, such as Disney, have also been impacted by investor fears.