Why is Netflix Losing its Subscribers for the First Time in a Decade?
Updated: Dec 26, 2022
Netflix has recently announced that they have lost 200,000 customers globally in the first quarter, January-March period, of 2022. Everyone must have thought what a large number this is - and so have I. After netsurfing, I found out the company was initially seeking to gain 2.5 new customers during this period. But how did the decline in the number of customers unexpectedly happen?
The reasons behind this surprising news about Netflix are now up on many platforms. However, today, I would like to share some of the crucial aspects of this topic based on my research and perspectives.
There are mainly an event and some factors that have led to the reduction of Netflix viewers:
Pulling out of Russia
A growing number of competitors
Ongoing provision of password-sharing systems
Pulling out of Russia:
In March 2022, Netflix suspended its services from Russia because of President Putin's continuing invasion of Ukraine. In addition to blocking its 700,000 Russian subscribers, they have stopped the provision of all Russian-made and commissioned films and TV shows. Even though taking these actions seemed rational and considered reasonable, losing a tremendous number of subscribers at once was more than damaging to the company.
Now, Russian users are suing Netflix for taking all these actions, stating that the Ukraine-Russia conflict is all done by their president. However, despite these millions of voices, the company has not responded to them yet.
There is also an arousing argument that pulling out of Russia was not as effective as the company hoped - to gain revenge growth from worldwide viewership declines due to the reduction of pandemic restrictions in the January-February periods. Netflix now expects another 2 million subscribers to fall off this quarter. Moreover, they have confirmed to its shareholders that "our revenge growth has slowed considerably."
A growing number of competitors:
As the chart from Netflix's investor letter indicates, its share of total TV time has increased from last year; while Netflix accounted for 6% of the Share of Total US TV time in May 2021, its figure grew to 6.4% in February 2022. Nevertheless, an increase in subscribers does not mean the company is keeping its position as the best streaming service. The chart provided by Netflix also highlighted a growing number of competitors in the market, which is problematic as they intend to take away contents that Netflix has, not just the subscribers.
When Netflix was founded in the late 90s, Hollywood and other filmmaking companies were willing to let Netflix stream their productions because they expected that not many people would find value in services like Netflix. Nonetheless, now that they figured out this type of business is beneficial, they started their streaming services.
Netflix's fear of losing its popularity to competitors is obvious to many of us via its introduction to other services, such as video games and password-sharers.
Ongoing provision of password-sharing systems:
In the letter to shareholders, Netflix has admitted its loss of customers to be partly blamed on its password-sharing systems. The company's initial purpose of introducing these systems was to increase the number of subscribers within households to fuel. Nonetheless, while they have been increasingly popular, they have also caused users exploitation. It is clarified that at least 100 million households use other's accounts. Thus, the provision of password-sharing systems highlights the lack of marketing strategies and improvement of Netflix - I think they could have dealt with the problem of password-sharing if they had taken action sooner.
Last month, Netflix announced that they won't ban password-sharing services but will start charging for them. To begin with, they have started testing this in 3 countries: Peru, Chile, and Costa Rica. However, many people have already reacted to this announcement with dissatisfaction as the tests are going to take at least a year to complete. I expect that the provision of this new measure will end up in a failure, creating additional loss of its users.
Consequently, these are the main reasons why Netflix saw a decline in its users for the first time in this decade. The company is now expecting even more decrease in customers. However, as a huge fan of Netflix myself, I hope that they will find a way to fix this problem.