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Shares in consumer video streaming service Netflix Inc. dropped more than 35% Wednesday today after the company reported its first drop in subscribers in more than 10 years.

Netflix has long been the darling of streaming services with its constant quarter-over-quarter growth, but the party has now ended. Netflix reported a loss of 200,000 subscribers in the quarter and the financial figures across the board were mixed.

For the quarter ended March 31, Netflix reported a profit of $3.53 per share on revenue of $7.87 billion. Analysts had expected a profit of $2.91 a share on revenue of $7.95 billion. The loss of 200,000 subscribers was the polar opposite of the 2.51 million additional new subscribers that analysts had expected. In the same quarter of last year, Netflix added 4 million new subscribers.

The surprising drop was blamed on multiple things by Netflix. In the letter to shareholders, the company blamed the COVID-19 pandemic — not for its quarterly decline but for its previous boost. In Netflix’s words, “the big COVID boost to streaming obscured the picture until recently.”

However, the 25% stock dip wasn’t caused by a quarterly 200,000 dip in subscribers alone. Having ended the quarter at 221.64 million subscribers, Netflix forecasted 219.64 million subscribers in the second quarter — a drop of 2 million subscribers. Quarter over quarter, the predicted drop is 2% of subscribers.

Netflix’s tanking stock price comes when the company has been looking at ways to expand its appeal to a broader audience while also cracking down on so-called “password sharing.” It was reported in March that Netflix was testing charging customers more who password share, starting in South America.

Variety reported Chief Executive Officer Reid Hasting revealed in the company’s earnings call that Netflix is planning to launch cheaper ad-supported plans. In an increasingly crowded and competitive market, Netflix is one of the most expensive options on the market outside North America.

“Those who have followed Netflix know that I have been against the complexity of advertising and a big fan of the simplicity of subscription,” Hastings said. “But as much as I am a fan of that, I am a bigger fan of consumer choice. And allowing consumers who would like to have a lower price, and are advertising-tolerant, get what they want, makes a lot of sense.”

Hastings noted that when Netflix launches an ad-backed option, it will do so as a publisher, without data tracking and ad-matching used by other services.

Photo: Netflix