For the first time in over a decade, Netflix announced a drop in subscribers, with over 200,000 subscribers saying goodbye to their accounts.
The company's decline in subscribers over the first three months of 2022 doesn't come as a major surprise considering the company's recent events. Let's look into why this may have happened and see what the company plans to do about it.
Netflix Loses 200,000 Subscribers in Q1 of 2022
Netflix's earnings report for Q1 2022 shows the company lost 200,000 subscribers. While Netflix's initial estimates indicated it would add some 2.5 million new customers during this period, the numbers have gone down instead. Furthermore, the company warns that it may lose a further 2 million subscribers in the second quarter of 2022.
The revenue growth of Netflix has also slowed considerably over the same period, partly due to the loss of subscribers and partly due to the widespread account sharing done by users.
Why Is Netflix Losing Subscribers?
The loss in numbers for Netflix is undoubtedly upsetting for the company itself and its stockholders, but it isn't necessarily surprising. Here are some of the reasons why this is happening.
1. Netflix Pulled Its Service From Russia
Following the start of the war in Ukraine, Netflix joined hundreds of companies worldwide and decided to stop its activity in Russia. After pulling the plug on its Russian operations, the company admitted to losing some 700,000 subscribers.
2. Netflix Hiked Up Prices in US and Canada
At the beginning of 2022, Netflix decided to increase its subscription price in the United States and Canada. Faced with the new costs, subscribers canceled their Netflix accounts instead. Netflix claims 600,000 subscribers in North America canceled following the price hike from January 2022.
3. Netflix Account Sharing Slows Down Growth
One of the most significant issues Netflix has struggled with over the years has been account sharing. Customers have been ignoring that the Terms of Service specifically ban sharing your password.
Netflix estimates that some 100 million households worldwide, with 30 million of those in the USA and Canada, are using the service without paying for it.
Considering that Netflix has 222 million subscribers worldwide, adding another 100 million would be a massive feat.
4. Netflix Keeps Losing Content From Media Companies
In recent years, Netflix has lost tons of content from various major networks across the US. Whether we're talking about shows from NBC, CBS, AMC, and so on, they've all gone to other streaming platforms. Media companies have also been merging, launching their own streaming services, and pushing their content through those outlets instead of licensing through Netflix.
This has pushed Netflix to invest billions in creating original content. While Netflix's original content is OK, people want to watch some of their favorite shows and old-school classics on TV.
5. There Are Too Many Streaming Services
Nowadays, there are too many streaming services available. On top of Netflix, Hulu, HBO Max, and Amazon Prime Video, we have Peacock, Paramount+, Disney+, Apple TV+, ESPN+, etc.
Each platform delivers a specific set of shows and movies that people are looking for, so it all comes down to which ones they'd rather pay to watch. Sometimes, Netflix may not cut it, especially since it's also one of the pricier options on the market.
How Netflix Plans to Combat These Losses
Netflix's growth has slowed down a bit, so it's time for the company to take further steps to ensure it wins the streaming war. Adding subscribers and keeping the revenue up will require more work moving forward.
One of the first things Netflix is likely to tackle is account sharing. Netflix even ran a trial asking subscribers in some countries to voluntarily pay extra to be allowed to share their accounts while also making the whole experience safer for everyone involved. Therefore, it is safe to assume that measures against password sharing will be implemented sooner rather than later.
Another thing that Netflix has admitted to considering is launching an ad-supported plan. Most streaming services offer such a plan, including Hulu, Peacock, and Paramount+. Offering a cheaper plan may be a good solution, especially considering how many people decided to cut Netflix out after its latest price hike.
Netflix Losing Customers Is Not the End of the World
While it's true that losing customers is a hard pill to swallow for Netflix, especially after more than a decade of growth, we must admit that special circumstances led to this.
Ultimately, however, as consumers, we get to decide which platforms we want to subscribe to and which ones should be left out. With so many options nowadays, Netflix should definitely be on its toes if it wants to keep its subscribers.
