Netflix has seen its subscriber numbers fall for the first time since 2011. Now the streaming service has commented on possible reasons for the downtrend and how that could affect future plans.
Netflix is a fixture in the highly competitive streaming market. Although competitors like Disney+ are pushing hard, the curve of Netflix subscribers has always been upwards – until now. According to the quarterly report, the number of paying customers fell from 221.84 million to 221.6 million in the first quarter of 2022, which means a decrease of a good 200,000. The numbers also have a negative impact on the stock trend. Now Netflix is considering several measures to improve the balance sheet again.
Also under discussion: shorter seasons or an advertising-financed model in which customers would be shown individual advertising clips in the future. They also want to take even tougher action against illegal account sharing.
Program changes affect all users
Netflix would like to reduce costs in the future and choose the program better. From Netflix circles, for example, one hears that there will hardly be any more talk shows and musicals because these genres are no longer so popular. At the very least, the money goes into other areas like documentaries and unscripted reality shows.
But the cuts in series in general and episodes in particular should be significantly harder. This trend can already be seen. So, the second season of the series “Matryoshka” (eng. “Russian Doll”) has one episode less than the first season. Not the only example of shorter seasons. If you’re wondering how one less episode is supposed to help Netflix out of its misery, you have to understand the sometimes enormous production costs. A episode of “Stranger Things” is said to cost around $30 million.
Speaking of “Stranger Things”: Netflix will probably no longer mass produce such expensive productions. Instead, effectiveness is required. You’re probably looking for cheaper productions that still bring in a lot. The best example of this is “Squid Game”. But these experiments can also go wrong. Then users simply get less quality.
The last lever is the shortening of individual episodes. This possibility is also in the room and should probably be implemented. However, Netflix manager Bela Bajaria says that shorter episodes have no economic reasons, only creative reasons.
Will we see ads on Netflix soon?
In response to the numbers, Netflix could take another radical step. CEO Reed Hastings has previously expressed his opposition to the idea of showing advertising on Netflix. Suddenly Hastings strikes a completely different note. The company expects to commit to an ad-supported streaming strategy in the next year or two. One is very open to the idea of offering a cheaper model that is associated with advertising. The Netflix boss justified his change of heart with greater choices for users.
“But as much as I’m a fan of it, I’m an even bigger fan of consumer choice.” And for consumers who want a low price point and are ad-tolerant, allowing that to happen makes a lot of sense.”
Reed Hastings, Variety
Also interesting: Experts already expected advertising on Netflix in 2019
Account sharing should be punished more severely
It is well known that several people can share a Netflix account and this is also allowed within a household. But not beyond that. As a result of the poor quarterly figures, Netflix intends to take even tougher action against illegal account sharing in the future. According to COO Greg Peters, they want it within a year Charge additional fees for shared accounts. This practice is already being tested in some South American countries.
Also interesting: How exactly does Netflix take action against unauthorized account sharing and how does the streaming service actually recognize this?
This is behind the loss of customers at Netflix
In general, it has been observed for some time that Netflix growth has slowed down. According to Netflix, this can generally be attributed to the great competition and the now high penetration of households. Otherwise, the streaming service cites the economic consequences of the pandemic and the Russian war in Ukraine as the main reason for the new, worse numbers. In a letter to the shareholders it says, among other things:
“Macro factors including sluggish economic growth, rising inflation, geopolitical events such as Russia’s invasion of Ukraine and some ongoing disruptions from COVID are also having an impact.”
Among other things, Netflix deactivated 700,000 customer accounts in Russia in response to the war of aggression. The streaming service lost hundreds of thousands more subscribers as a result of the increased prices in the USA and Canada. Netflix itself also cites illegal multiple use of accounts, which is still widespread. An estimated 100 million households would already use the streaming offer without paying for it themselves, according to Netflix.
Netflix still well ahead of Disney+
Even though Netflix is now showing a downward trend for the first time in over a decade, it’s still ahead of the competition. For comparison: In February 2021, Disney+ recorded 130 million subscriptions in second place – a difference that it cannot have made up in the past year. And despite fewer users, Netflix still posted a profit of $1.6 billion this quarter. However, the streaming service expects fewer subscribers again in the coming months. It remains to be seen whether there will be further consequences.
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