Netflix and chill. While the latter word is applicable for viewers as they enjoy their fave movies and series on the streaming platform, Netflix is not in the right position to loosen up right now, especially since it lost 200,000 subscribers in the first quarter of 2022. It is the company’s first subscriber loss in over a decade, but a bigger tragedy could strike it in the coming days: Netflix predicts losing 2 million subscribers in the next quarter.
The loss, nonetheless, is somehow expected by the company after it admitted in the letter it sent to its shareholders that it only anticipated a 2.5 million subscriber increase in the said quarter, compared to the 4 million subscribers it gained last year under the same quarter. With this, the company’s subscriber base of 221.8 million in the former quarter decreased to 221.6 million. It still makes Netflix the largest streamer company, but the changes could be just the start of something more problematic.
According to the letter, various factors contribute to the drop in its subscriber numbers. One of them is the current pandemic happening around the globe. “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.”
Apart from the pandemic and competition, Netflix says that “sluggish economic growth” and inflation are also reasons. In relation to that, the ongoing war between Ukraine and Russia is also mentioned as one of the macro factors since the company suspended its service in the latter in March. The invasion also caused a slowdown in the business of Netflix in Central and Eastern Europe during the same month.
Netflix also attributes the password sharing of accounts to the stagnant and slow gain of new subscribers. It says that at least 100 million households are sharing passwords. “Account sharing as a percentage of our paying membership hasn’t changed much over the years, but, coupled with the first factor, means it’s harder to grow membership in many markets – an issue that was obscured by our COVID growth.”
To address the last issue mentioned, Netflix is testing a feature that prompts users to pay extra if the system detects that the password is being shared outside the household. It is currently being tested in certain areas now, like Costa Rica, Peru, and Chile, but the company plans to implement it worldwide soon.
Moreover, to retain and attract more subscribers, Netflix says that it is already implementing new features and steps that could help it provide better service in the future.
“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,” it says. “On the content side, we’re doubling down on story development and creative excellence, which we see reflected in big Q1’22 TV hits like Bridgerton (627 million hours viewed for season 2, our biggest English language series in our history) and Inventing Anna (512m hours viewed) – both from our extremely successful partnership with Shonda Rhimes – and films like Tinder Swindler (166m hours viewed, our biggest documentary film ever released) and The Adam Project (233m hours viewed), which come on the back of our Q4 hits Red Notice and Don’t Look Up. 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.”
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