Netflix reported worse-than-expected results late on Tuesday, as the streaming giant discovers how getting canceled really feels.
What does this mean?
Investors were expecting Netflix to report another quarter of slowing subscriber growth, but the results turned out even worse than they’d thought. Netflix lost 200,000 subscribers last quarter, with three of its four regions seeing falls – marking the first time in over ten years that it has actually lost customers. The streaming giant said its rising subscription prices might’ve put some viewers off, and thinks its withdrawal from Russia cost it 700,000 customers too. But it looks like it could get worse still, with the company expecting to lose another 2 million subscribers this quarter as well. And since investors use subscriber growth as a measure of future profitability, they didn’t take that as a good sign: they initially sent its stock plunging 25%.
Why should I care?
The bigger picture: Streamers are the first to go.
It’s no wonder Netflix is struggling to add new viewers, let alone keep its old ones: data out over the weekend showed that UK households canceled streaming subscriptions in record numbers last quarter, with 25% more cancellations than the same time last year. That comes as consumers around the world cut back on life’s little luxuries to cope with rising prices – a decision that’s been made all the more imperative by streamers’ rising prices. Throw in more choice of streaming services than ever, and Netflix is facing an uphill battle.
Zooming out: Advertise here.
One way analysts reckon Netflix can make up for that non-existent subscriber growth is by selling advertising on its platform – like HBO Max already does and Disney+ is planning to do. In fact, they think Netflix could make as much as $3 billion in extra revenue if it follows suit. And since the strategy wouldn’t cost much to roll out, a substantial portion of that would go straight to the streaming giant’s bottom line.
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China’s Economy Grew More Than Expected, But It’s Slowing Fast
Data out this week showed that China’s economy grew by more than expected last quarter, but its explosive start to the year has already started to peter out.
What does this mean?
China was firing on all cylinders at the start of the year: investment in manufacturing and infrastructure was up by 16% and 9% last quarter compared to the same time in 2021, while industrial production – a key driver of China’s post-pandemic recovery – rose by a better-than-expected 5%. That helped the economy grow by a better-than-expected 4.8%.
But here’s the thing: those numbers were mainly down to the first two months of the year, and there are signs that the country’s late-March lockdowns are now starting to hit consumers. The unemployment rate hit its highest level in March since May 2020, while retail sales fell 3.5% from the year before – more than twice the drop economists were expecting. And they think it’s only going to get harder from here…
Why should I care?
The bigger picture: China throws mud against a wall.
The way things are going, it’s a tough ask for China to meet its aim to grow its economy by 5.5% this year. That might be why the country’s central bank announced a laundry list of economic support measures this week to set it back on track – everything from delaying loan repayments, to supporting local infrastructure investments, to making it easier for domestic businesses to borrow overseas.
Zooming out: Ah geez.
China’s slowdown is reflective of a much bigger problem: The World Bank cut its forecast this week for global economic growth this year from 4.1% to 3.2%, due to the impact of Russia’s invasion of Ukraine. It didn’t rule out further cuts either, and said it’s planning to roll out $170 billion worth of support – to help food shortage-hit countries, support those that have taken in refugees, and more – over the next 15 months.
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