Netflix Loses Subscribers Globally, Considers New Strategies Including Cheaper, Ad-Supported Tier
On Tuesday, Netflix reported that they lost subscribers for the first time in their history as a streaming platform.
This was announced during their Q1 2022 earnings meeting, where the company reported 640,000 fewer subscribers in North America, as well as a 300,000 subscriber loss in Europe, the Middle East, and Africa. This part does come with an asterisk, as Netflix pulled out of Russia last month in response to their military strike against Ukraine, which meant they lost 700,000 subscribers in that country alone. In South America, Netflix has 350,000 fewer subscribers than by the end of the last quarter.
On the flip side, they added over 1 million subscriptions in the Asia-Pacific market, which compensates for the losses in the other markets, making the global number a negative 200,000. Taking Russia out of the picture for special circumstances, Netflix could argue they added 500,000 subscribers. But even that would represent one of the smallest quarters they have had in a long time.
And the bad news doesn’t stop there. The company is forecasted to lose an additional 2 million subscribers by the end of the next quarter. Their stock price has dropped in free fall over the past month, and this week they’ve really taken a dive. To deal with the loss of subscribers, Netflix also announced plans to include an advertisement-based tier, which would come at a lower price, as co-CEO Reed Hastings announced during a pre-recorded interview:
“Those who have followed Netflix know that I have been against the complexity of advertising and a big fan of the simplicity of subscription. But as much as I’m a fan of that, I’m a bigger fan of consumer choice and allowing consumers who would like to have a lower price, and are advertising tolerant, get what they want makes a lot of sense. Think of us as quite open to offering even lower prices with advertising as a consumer choice.”
He also announced the company will be rethinking its financial strategy, and pulling back some of its spending on content:
“We’re pulling back on some of our spend growth across both content and non-content spend. We’re trying to be smart about it and prudent in terms of pulling back on some of that spend growth to reflect the realities of the revenue growth of the business.”
The company also believes one of the reasons they are losing so many subscribers is account sharing. To fight that aspect, they started testing in March a new feature to monetize password sharing, and they intend to implement it globally in the not-so-distant future. From THR:
“The feature, unveiled in Chile, Costa Rica and Peru, charges primary account holders a small fee to add two users outside of their households onto their accounts, though it’s not immediately clear what kind of impact on revenue the test has led to thus far.”
Time will tell whether these new strategies work for them. For now, their biggest problem is the level of competition they are facing, especially against HBO Max, which is putting out a lot of quality content, Disney+, which is starting to use their wide roster of IPs to attract as many subscribers as possible, and Amazon Prime, which has just announced they will be adding the entire James Bond library following the acquisition of MGM last year, and is putting out the most expensive show of all time in September, The Lord of the Rings: The Rings of Power. Not only that, but Apple TV+ is not to be messed with, especially after they beat Netflix in their own game last month when CODA won Best Picture.
Netflix subscribers have admittedly fewer reasons than ever to pay for the platform. It is one of the most expensive streaming services, their ratio of quality vs. quantity is not very favorable, and they’ve lost the rights to most of the shows people subscribed for, like The Office and Friends. Things could also change for them in the coming months, once the Sony deal they made last year comes into place. That deal will make Netflix the distribution platform for all Sony movies released in 2022 and onwards. It will unfortunately not include Spider-Man: No Way Home, but will capture Spider-Man: Across the Spider-Verse after it arrives theatrically later this year.
Miguel Fernández is a Spanish student that has movies as his second passion in life. His favorite movie of all time is The Lord of the Rings, but he is also a huge Star Wars fan. However, fantasy movies are not his only cup of tea, as authors like Scorsese, Fincher, Kubrick or Hitchcock have been an obsession for him since he started to understand the language of filmmaking. He is that guy who will watch a black and white movie, just because it is in black and white.
