Vows rebound with the launch of an ad-supported subscription plan, password-sharing crackdown, and a slight belt-tightening
The streaming giant had witnessed 200,000 subscriber defection in the first quarter in April and predicted a dip of two million of its paid customers in the second quarter. But, Netflix stops the bleeding by claiming to add another one million Netflix subscribers in the third quarter, and an aggressive crackdown on password sharing.
That’s certainly good news for Netflix for what was supposed to be a bad one. Well, not really because when Netflix predicted a loss of two million subscribers in Q2, its stock price rose more than 6% in after-hours trading on the news. Despite the winning, the shares fell by more than a third in April and the company is down by 63.77% for the year.
Why has Netflix Lost So Many Subscribers?
The company counts on factors including:
- Intensifying competition
- Password sharing
- A saturated US market
- Its decision to increase prices when consumers are coping with soaring inflation; and,
- Broader factors like sluggish economic growth and the war in Ukraine.
Netflix’s biggest subscriber loss came from its biggest revenue generator, the United States and Canada. The streaming company lost 1.3 million users in the second quarter alone between the end of March and June.
This subscription loss is still double the 600,000 drop the company reported for Q1. Netflix now claims that it has 73.28 million paid subscribers in the US and Canada alone and a total of 220.67 million subscribers worldwide.
220.67 million subscribers decreased from the 221.64 million reported at the end of Q1. The revenue was $7.97 billion in the second quarter which is an increase of 8.6% from the year-earlier due to the strong U.S. dollar, while net income landed at $1.44 billion which is a step up from $1.35 billion a year earlier, close enough to what Wall Street was expecting.
Here’s a better picture.
Netflix saw a 1.3 million loss in the US and Canada, despite major English-language series like Stranger Things‘ fourth season.
Europe, Middle East, and Africa region saw a slide down in subscriber growth during Q2, losing 770,000 subscriber count. Latin America saw an addition of 1,000 paying subscribers, while Asia-Pacific emerged as the strongest contributor to Netflix’s subscriber count, bringing in 1.08 million customers during the quarter.
The clip down of Netflix subscribers and reduced viewership have frowned their eyebrows. Since the Q1 earnings report, Netflix has been cutting costs and laying off 350 of its employees as well as contract workers in the field of marketing and social media.
The company is also expected to spend some $17 billion on content this year along with big-budget movies such as “The Gray Man”. The streamer is planning to take on fewer but better projects.
The streaming company also reevaluated its film strategy and in an effort to beef up sales, the company said it would focus on improving its revenue lines, incorporating an ad-based subscription plan, and cutting down on free password sharing.
The company in a statement said,
Over time, our hope is to create a better-than-linear-TV advertisement model that’s more seamless and relevant for consumers, and more effective for our advertising partners.
Speaking of ads, the streamer announced its partnership with Microsoft which would serve as Netflix’s global advertising technology and sales partner. Apart from this, Netflix is also eyeing out on those who access the service without paying for it.
Its effort to monetize password sharing will make for a revenue loss. The primary account holders can add users outside of their household for a certain fee. It will test this feature of additional fee structure in Argentina, Dominican Republic, EI Salvador, Guatemala, and Honduras for something as small as $2.99 a month.
This feature of paid sharing is set to roll out widely in 2023.
Netflix is focused on choice and control for subscribers and an escape from irritating ads. Factoring in the ads, and pushing consumers to pay more to share passwords with others might not be an easy turn for the company.
What do you think of the changes Netflix has introduced in these economic conditions?
Let me know your thoughts in the comments below!