Streaming giant Netflix has reported its first subscriber loss in over a decade—a loss of 2,00,000 paid subscribers in the first quarter of 2022. It is the first time that Netflix's subscribers have fallen since the streaming service became available throughout most of the world outside of China six years ago.
After this revelation, the company's stocks tumbled by 25 per cent, according to reports. The streaming service saw subscriber numbers drop from 221.84 million to 221.64 million from January through March. It had predicted earlier it would add 2.5 million subscribers in the period. The company has now projected it will lose 2 million more subscribers in the second quarter.
While listing out the factors that could have caused the drop, Netflix, that is facing stiff competition from rivals like Disney Plus, HBO Max and Apple TV+, also warned of a possible crackdown on free password sharing. In its letter to shareholders, Netflix agreed it had allowed password sharing to increase the platform's penetration and get more people hooked to the content. However, it estimates that in addition to its 222 million paid users, Netflix is being currently shared with roughly 100 million additional households.
“Sharing likely helped fuel our growth by getting more people using and enjoying Netflix,” the company said in its shareholder note. “And we’ve always tried to make sharing within a member’s household easy, with features like profiles and multiple streams.” With password sharing, users could stream content using an acquaintance's login credentials. The company said that it is now planning to monetise password sharing beyond single households.
“If you’ve got a sister that’s living in a different city, you want to share Netflix with her, that’s great,” Netflix chief operating officer and chief product officer Greg Peters said in a video. “We’re not trying to shut down that sharing. But we’re going to ask you to pay a bit more to be able to share with her so she gets the benefit and the value of the service but we also get the value of the revenue associated with that viewing,” The Verge quoted him as saying.
To stop the practice and prod more people to pay for their own accounts, Netflix indicated it will expand a test introduced last month in Chile, Peru and Costa Rica that charges subscribers an additional fee if they want to share passwords outside of their household.
What caused the drop in subscriber count?
The drop this year partly stemmed from Netflix's decision to withdraw from Russia to protest the war against Ukraine, resulting in a loss of 700,000 subscribers. “Macro factors, including sluggish economic growth, increasing inflation, geopolitical events such as Russia’s invasion of Ukraine, and some continued disruption from Covid are likely having an impact as well,” Netflix said in a letter.
Netflix, however, said it is making good progress in APAC "where we are seeing nice growth in a variety of markets including Japan, India, Philippines, Thailand and Taiwan”. The Asia Pacific (APAC) region added 1.09 million paid Netflix members in the region in Q1 2022. Last December, Netflix had cut subscription prices for all its plans in India.
Besides changes in password sharing, Netflix could also consider an ad-supported platform, CEO Reed Hastings hinted. “Those who 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,” he said. Netflix could venture into cheaper subscription plans that are not ad-free.
