Netflix announced that it lost subscribers for the first time in 10 years in early 2022, sending its shares plummeting.
The streaming pioneer has stumbled in the face of increasing competition from companies like Disney, Amazon Prime and movie theaters reopening.
Shares of the US company have been halved over the past six months as investors grew concerned about the company’s performance.
The PA news agency took a look at the challenges Netflix is facing and what the company is likely to do next.
– What are the problems of Netflix?
The main problem for Netflix is simply that it lost viewers earlier in the year while its biggest competitors made gains.
Netflix announced on Tuesday that it lost 200,000 subscribers in the first three months of 2022, falling far short of predictions that it would add 2.5 million subscribers.
In the UK, pressure on streaming companies has become apparent as customers look to scale back their number of subscriptions as they face soaring energy and goods bills amid the cost of living crisis.
Kantar experts said earlier this week that around 1.5 million subscriptions have been canceled in the UK since early 2022.
Anatomy of a scandal = 1
Better call Saul S6 Ep1&2 = 5
Russian doll S2 = 6
Heart stoppers = 8 🍂
Sell Sunset S5 = 8
Ozark S4 Part 2 = 15
Grace & Frankie: Final Episodes = 15
Stranger Things S2 Volume 1 = 43
The umbrella academy S3 = 69
Stranger Things S4 Volume 2 = 78
— Netflix UK & Ireland (@NetflixUK) April 14, 2022
video of the day
According to Netflix, the difficult economic backdrop, the war in Ukraine, slower broadband adoption in some countries, and the large number of subscribers sharing their account details with non-paying households all contributed to the decline.
The company’s withdrawal from Russia after invading Ukraine meant it immediately lost its 700,000 customers in the region, but the company would have seen numbers well below expectations even without the intervention.
As customer spending comes under pressure, the group faces increased demand for quality content to justify people’s subscription fees.
The company’s biggest challenge in recent years has been ensuring a strong slate of original series and films, as many previous partners like Disney have retired their content to launch their own platforms.
– How bad could the subscriber flight get?
The main reason shares fell so sharply on Tuesday was because bosses warned shareholders the situation would get worse before it got better.
Netflix predicted another two million users will leave in the three months to July.
The company said its earnings fell 6% in the most recent quarter, and the bearish outlook could indicate an even sharper earnings decline could be on the way.
Freetrade’s Paul Allison said the projected drop in users is “a worrying sign…at a time when the company is raising prices across the board to generate enough cash flow (which is currently negative) to maintain an entertaining programming offering.” .
The streaming company hopes its recent heavy investment in new content and franchises will quickly bear fruit.
Last year the company announced multi-million pound transactions to buy the works of Roald Dahl and the rights to the upcoming Knives Out sequels.
It will also hope that the return of the best-performing series – like Next Month’s Stranger Things – will discourage customers from considering canceling their subscriptions.
– What could they do next?
The company’s chiefs said Tuesday they are considering a number of significant changes that could improve customer numbers and profitability.
They said they are now open to adding advertising to the service in exchange for a cheaper subscription.
Reed Hastings, Netflix co-founder and chairman, has long been opposed to bringing commercials to the service, but could take the step to add another revenue stream.
The company could also take action against customers who share their accounts with other households.
Netflix launched a crackdown on people who share passwords in Chile, Costa Rica and Peru and is considering expanding the program.
The company said in its latest financial report that it believes it will be shared with 100 million additional households in addition to the 222 million paying for the service.
When Netflix first made the switch from DVD rentals to home streaming, the company had very few competitors, but it has seen growing competition in recent years.
People have taken out numerous subscriptions over the past few years but are now beginning to reduce the number they pay for as the cost of living crisis drives them to tighten their belts and create more competition.
Disney+ was a notable winner last year as the company attracted more customers than it originally anticipated as families signed on during the pandemic.
Netflix also continues to face competition from Amazon, which last month acquired James Bond studio MGM in an $8.5 billion (£6.5 billion) deal to build a library of content for subscribers .
One of the group’s biggest competitors is the desire of customers to be able to spend time away from screens at any time.
Reed Hastings infamously said Netflix sees the human need to sleep as a bigger competitor than Amazon and HBO because it takes up a “very large pool of time,” and said it benefits from keeping viewers up late because they’re addicted become a series.
https://www.independent.ie/entertainment/netflix-why-is-the-streaming-giant-losing-viewers-and-what-will-it-do-now-41570277.html Netflix: Why is the streaming giant losing viewers and what will it do now?