For the first time in its existence, Netflix, the uber-popular streaming platform that has generated lots of memes, has lost subscribers. During the first quarter of 2022, the company lost 200,000 users globally. The bad news is that Netflix is forecasting even more losses as it says it could lose about 2 million subscribers this quarter.
In its letter to shareholders, Netflix wrote, “Our revenue growth has slowed considerably. Covid clouded the picture by significantly increasing our growth in 2020, leading us to believe that most of our slowing growth in 2021 was due to the Covid pull forward.
Netflix remains the largest streaming platform, with about 222 million subscribers. However, there are unmistakable signs of a slowdown in growth.
Netflix tried to boost its revenue in January by announcing it was raising subscription costs for the first time in two years. As a result of the price hike, the platform lost 600,000 subscribers. But it was within its expectations.
The platform has identified the major problem; password sharing. Netflix said the act has become so pervasive that it estimates 100 million households use shared passwords. These should have been revenue-generating customers, but Netflix said it makes growing membership harder in many markets.
Meanwhile, Netflix also has to fight off competition from a growing list of streaming services that have made its growth incremental lately. There is also a race to the bottom as competing services have started offering lower-priced plans. For example, Disney Plus, one of the most promising competitors, will begin offering an ad-supported plan and will reduce the amount paid by subscribers. Hulu, Peacock, and HBO Max also offer cheaper plans supported by ads.
Netflix also suspended services in Russia after the country invaded Ukraine. The penalty to the streaming platform is a loss of 700,000 subscribers.
However, Netflix has some proposed solutions. “Our plan is to reaccelerate our viewing and revenue growth by continuing to improve all aspects of Netflix — in particular the quality of our programming and recommendations, which is what our members value most.”
Netflix will also pursue growth outside the US, which would be critical to its future. “Over the longer term, much of our growth will come from outside the US.”
This quarter doesn’t look promising when it comes to attracting new users. Netflix doesn’t have any big-name release coming up but is relying on the return of Bridgerton and other fan favorites.
Meanwhile, Netflix is finally open to considering an ad-supported tier, after many years of rejecting such offers. Co-founder and co-CEO Reed Hastings revealed that the plan would target budget-conscious users who can tolerate ads.
However, the co-CEO admitted it would be a big change in thinking and operation for the company. Netflix had always preferred the simplicity of subscription-based offerings. The platform is also open to taking on sports, with the other CEO, Ted Sarandos, saying, “I’m not saying that we’ll never do sports, but we’ll have to see a path to growing a big revenue stream and a great profit stream with it.”
Netflix currently charges $10 per month for the base tier, $15.49 per month for the standard tier and $20 per month for the premium tier.