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Netflix Stock Drops After Company Loses Subscribers For First Time In Over 10 Years

In the first quarter of 2022, Netflix announced that it lost 200,000 subscribers, and it expects to lose an additional two million in the second quarter. It’s the first time the company has lost subscribers in a quarter since October of 2011.

Netflix currently has 221.6 million subscribers worldwide. The news of Netflix’s losses sent stocks down nearly 25% in after-hours trading.

The reality of the first quarter was far off from what the company had previously forecasted, which was an increase of 2.5 million subscribers that would have vaulted them to around 224 million in total. Netflix’s profit was still positive in Q1, however, with $1.6 billion, while their revenue rose 10% to $7.9 billion.

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In a letter sent out to shareholders, the company noted that in the near term, they’re not “growing revenue as fast as we’d like.” The company highlighted COVID-19 and the over two-year long pandemic, saying the the growth in 2020 — due to people staying at home and streaming shows — “obscured the picture until recently.”

Several issues at play were addressed within the letter, one being that the subscriber loss can be attributed to the fact that a person doesn’t necessarily need to buy their own account – they can just password share, which has become a huge issue for the streaming service.

“Account sharing as a percentage of our paying membership hasn’t changed much over the years, but, coupled with [growth being dependent on factors Netflix can’t control], means it’s harder to grow membership in many markets – an issue that was obscured by our COVID growth.”

Netflix estimated that more than 30 million U.S. and Canadian households are using a shared password to access its content, while more than 100 million households are using a shared password worldwide. Co-chief executive Reed Hastings had previously stated the practice as being “something you have to learn to live with.”

Now, it appears Hastings may be going back on his words. The company noted those who don’t pay for Netflix represent “huge growth potential.” Indeed, Citi analyst Jason Bazinet estimated streaming services lose $25 billion due to password sharing, with Netflix accounts totaling 25% of that.

The company seems to be intent on capitalizing that potential by cracking down on password passouts through a number of still being tested methods, like forcing those who share to pay additional fees. Of course, drastic changes like these run the risk of losing Netflix more consumers.

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Netflix also blamed the plunge on Russia’s invasion of Ukraine. In response to the invasion, they — along with 400 other companies — pulled out of (and halted all future projects within) the country, which costed them 700,000 subscribers. Among other factors Netflix noted include a sluggish economy and increasing inflation.

One of the major changes that could occur from this downturn includes Netflix’s acceptance of ads. While the company has been admanted over the last decade about not utilizing advertisements, Hastings told investors that they will look into a lower-priced tier supported by ads over the next couple years.

For the service, the ongoing struggle could be quite the eye-opener as it finds itself in the midst of a streaming war. Disney+, Apple TV, HBO Max, Hulu, and Amazon Prime Video are all vying for subscriptions and revenue.

Though Netflix still ended 2021 with more customers than any of the above, Prime Video (200 million subscribers worldwide) and Disney+ (129.8 million worldwide) weren’t far behind. CNN Business estimated that Netflix’s report was likely to roil the streaming industry due to the fact that so many firms have changed their strategies to compete with the company.

4.1 Million Individual Investors Own 80% Stock Of AMC Entertainment 

AMC Entertainment announced this week that 4.1 million individual shareholders own 80% of the company’s stock. 

“The number of investors who want to own a part of AMC continues to increase. More than 80% of AMC shares are held by a broad base of retail investors — highly unusual for big public companies — with an average holding of around 120 shares.”

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“Some hold more and some hold less, however, each and every shareholder is important to AMC. Each shareholder has a critical role to play in AMC’s future by having their voice heard by voting at our upcoming Shareholder Meeting. By voting in favor of the proposals, together we can help position AMC, in its 101st year of business, for continued success over the next century,”  CEO Adam Aron said in a statement.

AMC shares in general have soared after experiencing a 52-week low of under $2, to a new high of about $73. This Wednesday the shared closed off at $49, and Wall Street Analysts have been closely monitoring the way in which that price has been fluctuating. 

SEC chairman Gary Gensler said that he has “asked the agency’s staff to examine a variety of stock trading issues and rules, which are being closely scrutinized amid wild swings in so-called meme stocks like AMC, GameStop and a handful of others. Brokers profit when investors trade.”

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Aron claimed that “AMC has worked the stock rise to raise cash by issuing shares and selling them at inflated prices. We’ll use the latest cash injection for acquisitions including of ArcLight Cinemas and Pacific Theaters where the chain is in discussions with landlords.”

Within the past year of the pandemic, entertainment hubs like movie theaters and museums have seen a massive decline in revenue and foot traffic; for obvious reasons. So the fact that their stock prices were so low for so long makes sense, especially for AMC which was on the brink of bankruptcy in the beginning of the pandemic. 

Aron is continuing to try to get more investments, just last week he invited all shareholders to become AMC Stubs loyalty members for free, which allows them to get a free popcorn at every showing. As of this past weekend he tweeted that over 100,000 retail investors were not AMC Stubs members, quite a genius move for a company that was on the brink of extinction just a few months ago.