Guest post: Why the Netflix stock drop isn't just about Netflix

Guest writer Andrei Buruiana looks into the reasons behind the recent crash in Netflix's stock price and possible recovery measures from the company.

The major drop in Netflix's share price, -35% on April 20, is not entirely related to the fact that Netflix dropped its customer base by a net 200,000 in the first quarter of 2022. Considering the streaming provider has more than 221 million active customers, we're talking about less than -0.1% net churn rate (difference between customers dropping out of a company's services and clients joining, relative to the total number of customers).

Of course, in a context where analysts were anticipating a positive net customer add-on of around 2.5 million, the negative result was unexpected.

In its letter to investors at the end of Q1, Netflix mentioned among markets with net customer losses: North America (due to fee increases), Latin America and Central and Eastern Europe, and distinctively Russia, the latter having drastically reduced its usage since the start of the war in Ukraine.

Among the Central and Eastern European (CEE) countries, excluding Russia, at the end of 2021, Poland had the most Netflix subscribers, with around 1.8 million paying accounts. Romania ranked second in the region, with an estimated 481,000 subscribers, followed by the Czech Republic with 472,000.

But beyond the churn rate, which is expected to further worsen, a plethora of other causes contribute as well:

• the quality and refreshing rate of content, compared to rivals that cast live and/or sports content or even gaming, additionally;
• the fact that an estimated 100 million households benefit from Netflix services for free, by sharing their passwords;
• the streaming market is more competitive, with increasingly dynamic players such as Apple+, Disney+ etc.;

Netflix's market share has declined significantly over the last two years. Between Q1 2020 and Q1 2022, it fell from 55.7% to 45.2% globally and from 52.4% to 42.4% in the US, according to Parrot Analytics.

• as the pandemic restrictions fell, people have been throwing themselves into offline experiences, after 2 years of intensive online activities (a period that saw Netflix’s services benefit massively);
• the estimated closure of 700,000 accounts in Russia since the start of the war in Ukraine;
• investment-wise, Netflix has been a pandemic trade, along with Zoom and other online services. Specifically, much of its growth over the last two years is the effect of the pandemic.

Notwithstanding the aforementioned reasons, I'm reading a meta-motive here, between the lines: I think that users leaving Netflix is a symptom of the population's push-back against high prices, in general.