Netflix has admitted that its number of subscribers is falling for the first time in more than a decade, partly as a result of its decision to pull out of Russia.

The US streaming giant lost 200,000 subscribers in the first three months of the year, far below Wall Street predictions that it would add 2.5m subscribers.

Netflix shares plummeted 26pc in after-hours trading as it warned it would lose a further 2m subscribers in the second quarter of the year. 

Its decision in early March to suspend service in Russia after it invaded Ukraine resulted in the loss of 700,000 members. The company is also facing intense competition from streaming rivals like Disney+, and battling a cost-of-living crisis across the West.

Netflix said: “The large number of households sharing accounts, combined with competition, is creating revenue growth headwinds. The big Covid boost to streaming obscured the picture until recently.”

The company is testing technology that will ask subscribers to pay an extra fee if it detects people at multiple addresses logging in to the same account, in an attempt to crack down on sharing passwords.

It estimates that 100m additional households are accessing the service on top of 222m paying households, which it said it “means it’s harder to grow membership in many markets – an issue that was obscured by our Covid growth.”

Shares are close to falling below pre-pandemic levels. Covid lockdowns resulted in a huge number of people subscribing to streaming services, sending shares soaring.

In a glimmer of positive news for the company, the second season of Bridgerton recorded 627m hours viewed, making it the biggest English language series in the history of Netflix.

First-quarter revenue grew 10pc to $7.87bn, slightly below Wall Street’s forecasts of $7.93bn. Revenue is still expected to grow by 10pc next quarter compared to the second quarter last year.

Last January, the streaming giant posted its slowest annual growth since 2015 and predicted its worst start to a new year for 13 years due to a “Covid overhang”.

Investors wiped about $25bn (£18bn) off its market value in April last year when shares plunged 11pc in response to slowing subscriber growth.

This was before spiralling inflation increased the cost of living for consumers, who have been cutting non-essential expenses.

Kantar data shows that 215,000 Netflix, Amazon Prime and Disney+ accounts were terminated in the first quarter in the UK alone, as households braced for surging energy bills and the fallout of rising inflation.

Cancellations are expected to worsen, with the proportion of viewers planning to axe one of their streaming services to save money hitting a record 38pc.

The company operates in an increasingly competitive market. Disney has now reached 196.4m subscribers between Disney+, ESPN+ and Hulu as it continues expanding its market share globally.

Squid Game helped Netflix steady the ship last year when the South Korean dystopian drama became an unexpected global hit that drove a rebound in subscriber numbers.

To rival Disney’s Star Wars and Marvel Universe franchise, the debt-laden firm bought Roald Dahl’s back catalogue ahead of making shows based on the late author’s work.

Netflix plans to create a host of animations, films and a theatre production on his titles, which span Fantastic Mr Fox, The Twits and The Witches.

Meanwhile, the company has pushed into the video games sector in an attempt to diversify its income and mount a wider appeal to subscribers.

Netflix followed up a deal for the development studio Night School last month when it bought Boss Fight Entertainment, the studio behind the popular mobile game Dungeon Boss. 



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