Netflix has always provided quality content to its users. The company has been rolling out features and updates that would help to know its customers better. This helps to provide suggestions and recommendations that match their taste.
The company recently rolled out a ‘Two Thumbs Up’ feature so it can understand the kind of movies or TV shows it can suggest to its viewers. Apart from this, the company also rolled out video games along with streaming services to add variety to its entertainment offerings. In spite of everything that the company has done to give its customers elite and top-quality entertainment, its viewership seems to be decreasing.
For the first time in the span of a decade, Netflix has reported a decrease of 200,000 subscribers globally in Q1 2022. This also led to a 25% dip in its shares in extended trading. The company pointed to a lot of factors that could have led to this decrease. It also lost around 600,000 users in the US and Canada in this quarter. Amidst the Russia-Ukraine crisis, Netflix along with many tech companies suspended its services in Russia. Resulting in the loss of 700,000 subscribers.
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.
Although in January the company reported an increase in its monthly subscription for the first time in two years, it looks like it is facing challenges to retain them and also attract more customers. It is definitely facing a lot of competition from other OTT platforms that are offering services at a much lower cost. It already faced competition from the established streaming platforms for fifteen years but with the realization that streaming is the future, new companies have also emerged.
The company was also testing certain strict policies related to password sharing as it becomes harder to grow revenue that way. It also announced that it will charge viewers an extra fee if they want to share their passwords with people outside their households. This has slowed down its revenue growth. In January, the company also increased its subscription prices for the first time in two years which may be why it lost subscribers from the US and Canada.
These reasons paired with the increase in the competition are why the company’s overall growth has slowed. It also feels that COVID-19 had clouded their growth judgment in 2020. In a letter to its investors, Netflix mentioned that “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.”
The company is not surprised with the results and has also predicted that it could lose up to 2 million subscribers in the upcoming quarter.
“Those that have followed Netflix know that I’ve 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.”– Reed Hastings, co-CEO of Netflix.
The company is tackling the retention of customers and attracting new ones by working on the quality of content and features that it will offer to its users. Along with this, the company is planning to offer ad-supported plans. This will increase the options available for users to choose from.
Although the exact details of this plan are still unclear, Reed Hastings, the co-CEO of Netflix said, “Those that have followed Netflix know that I’ve 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.” Introducing such plans will give Netflix a new way of revenue growth.