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Netflix stock falls amidst warnings of slower subscriber growth

Korean survival drama Squid Game

Netflix gained 8.3 million subscribers in Q4 of 2021 to reach a total of 221.8 million globally, narrowly missing its target of 8.5m, while warning of slower growth ahead sent its shares tumbling.

During the quarter, the streaming giant increased its paid subscribers by 3.5 million in EMEA, 2.6 million in the Asia Pacific region and 1 million in Latin America. The company also added 1.2 million subscribers in the US and Canada, which it said marked its strongest quarter of growth in the region “since the early days of COVID-19 in 2020.”

However, the miss on its quarterly subscriber expectations – combined with its forecast to add only 2.5 million subs in the next quarter – sent shares tumbling by 20% in after-hours trading.

Revenue for the quarter was up 16% to US$7.7bn, while for the full fiscal year it climbed by 19% to US$30bn.

Ted Sarandos

Despite gaining 18 million members during fiscal 2021, the number of additions slowed considerably when compared with the 37 million gained in 2020.

Netflix said that “while retention and engagement remain healthy, acquisition growth has not yet re-accelerated to pre-Covid levels,” noting that several factors were to blame including the “ongoing Covid overhang and macro-economic hardship in several parts of the world like LatAm.”

Netflix also conceded that “added competition may be affecting our marginal growth,” though it noted that “we continue to grow in every country and region in which these new streaming alternatives have launched.”

In its letter to shareholders, Netflix highlighted that it had achieved “several milestones” in 2021, including its two biggest film releases of all time in the form of Red Notice and Don’t Look Up, a vast haul of nominations and wins at both the Emmys and the Oscars, and the unprecedented success of Squid Game.

While Netflix had previously been non-committal about a second season of the Korean survival drama, co-CEO and chief content officer Ted Sarandos was emphatic about it when asked during the Q4 earnings interview.

“Absolutely,” he said. “The Squid Game universe has just begun.”

Several new and returning titles premiered to impressive viewership in Q4, including The Witcher (484 million hours viewed during its first four weeks), You (468 million hours), Emily in Paris (287 million hours), Cobra Kai (274 million hours) and limited series Maid (469 million hours).

“Even in a world of uncertainty and increasing competition, we’re optimistic about our long-term growth prospects as streaming supplants linear entertainment around the world,” said Netflix.

“We’re continually improving Netflix so that we can please our members, grow our share of leisure time and lead in this transition.”

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