Why is Netflix Losing Subscribers?

Netflix lost 200,000 subscribers in the first 2022 quarter as it failed to meet its early prediction of adding 2.5 million subscribers to its customer base. Even worse, more people are forecast to follow them out of the door. The business said a number of factors were behind this, including rising prices, the conflict in Ukraine, and ferocious rivalry with other streaming services – so let’s break it down.

In the first quarter, the streaming giant revealed that it had lost regular subscribers, marking the first time this has happened since 2011, and Netflix expects to lose another 2 million more subscribers in the second quarter. “Our revenue growth has slowed considerably,” the company said as it made its quarterly total public. The all important question is: could this awful loss revealed in Netflix’s quarterly earnings spell a shift in the platform’s success story?

As the service loses subscribers, the corporation loses employees and puts the jobs of its remaining staff at risk too. Netflix also has a mountain of debt, which was $14.5 billion at the end of March. The business does have significant funds – around $6 billion to balance out the debt – but at any given time it also has billions in temporary content liabilities it must pay up. In fact, Netflix paid a huge $188 million in interest during the first quarter.

A potential reason for Netflix’s drop in subscribers is the easing of widespread pandemic restrictions and the scaling up of public events, which has not been good for Netflix. The service started to lose its tight grip on the world after the COVID-19 lockdowns, as people started to rely less upon accessible entertainment in their own homes and more upon going out and socialising. Another element to consider is the subscription price rise. Netflix has been making its monthly fees significantly larger worldwide, with some UK subscribers now paying a third more than they were less than two years ago for the same service. However, Netflix is taking a look at the possibility of a soft price cut, considering introducing a more economical plan which may have the scope to increase interest among those who haven’t been able to afford the subscription. Some people have also been complaining about the lack of variety available to watch on Netflix, citing competitors Disney+ and Amazon Prime as having more choice.

Netflix itself points the blame at two other culprits: firstly, the suspension of 700,000 accounts in Russia as a result of the war in Ukraine, and secondly, password sharing. Netflix roughly calculates that 100m households internationally access its services through password sharing. When you add in password sharing, which Netflix says accounts for 30m added households using the service in America, it is clear that the corporation is fighting for new signups from a rapidly diminishing pool of non-subscribers. Now, however, it has started conducting experiments with controls to turn some of those extra households into customers. In trials in some countries, Netflix has started asking subscribers if they share their service with people and urging them to pay an extra fee if so. Different from homes that are not subscribed to Netflix at all, those shared users have the technology to use the service, so Netflix believe they could be converted into actual customers. Despite all that password sharing, Netflix has an sizeable portion of all households: in the US and Canada, 75m out of a total 142m households have Netflix.  

Globally, Netflix has 222 million subscribers. Even with this quarter’s loss and next quarter’s loss, it will have 219 million subscribers – greater than any of its rivals. But if it wants to keep the subscribers it has, it will have to find shows they really, genuinely like.

Bridie Adams

Featured Image Source: Pexels

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