Netflix lost subscribers for the first time since 2011. The company predicts that it may lose as many as 2 million customers in the second quarter.
“Our revenue growth has slowed considerably,” Netflix acknowledges to shareholders. “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 has roughly 222 million subscribers as of the third quarter, making it still the planet’s biggest streamer, but it is facing several challenges.
Netflix lost subscribers
Netflix announced its first significant subscription increase in two years in January. The aftermath was reflected in today’s earnings report, with Netflix reporting that it lost 600,000 subscribers in the US and Canada. And they think it was “largely the result of their price increase”
Netflix lost subscribers, but why?
Netflix has recently announced that it will tighten the screws and scrap the bottom of the barrel on customers who share passwords and login information to increase revenue from users it already has. It’s a serious issue: Netflix now believes that as many as 100 million households are utilizing the service through shared passwords. “It’s harder to grow membership in many markets,” as a result of the situation, Netflix says.
The decline in signups results from the more competitive streaming market: Netflix faces stiff competition from a wider range of rivals than ever before, each trying to appeal to people’s attention. The prices are also lower, with Disney Plus announcing plans to launch a cheaper ad-sponsored tier later this year. So it’s no surprise that Netflix’s growth has become more incremental in recent years. After Russia invaded Ukraine in March, the firm halted service in Russia. According to today’s earnings report, Netflix has lost about 700,000 customers.
“Our plan is to reaccelerate our viewing and revenue growth by improving all aspects of Netflix, particularly the quality of our programming and recommendations, which is what our members value most,” Netflix proclaims in its earnings letter. “On the content side, we’re doubling down on story development and creative excellence.”
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The company notes, “on the product side, we recently launched ‘double thumbs up’ so members can better express what they truly love versus simply like, enabling us to continue to improve our personalized recommendations and overall experience.” Netflix also thinks international success is critical to its future. “Over the longer term, much of our growth will come from outside the US,” the company thinks.
Netflix has been expanding its reach into gaming to attract more subscribers. Netflix has expanded further into gaming in recent weeks, announcing a collaboration with Exploding Kittens and they will develop a mobile game and an animated series.
Netflix had little faith in acquiring new members this quarter, to begin with. According to the firm, is expected to gain 2.5 million additional subscribers over last year’s 4 million. Their coming up short of 2021 Q4 growth estimates in January was foretelling, even with the release of high-profile original films like Red Notice and Don’t Look Up.
The company’s stock fell dramatically when the news was announced, so it’s no surprise that the firm’s earnings being far worse than anticipated, had a similar effect in after-hours trading. This quarter didn’t have quite the same big-Hollywood entertainment as previous ones. Instead, Netflix relied on the return of Bridgerton and other fan favorites to fill the gap.
