In the first quarter of 2022, Netflix, the largest streaming platform, experienced a loss of about 200,000 subscribers in addition to the 600,000 lost in the final quarter of 2021. Netflix blames the loss on factors such as inflation, the war in Ukraine, competition, and password sharing. Netflix has released widely criticized plans in response to these declining numbers. This comes as competing streaming platforms subscriber numbers are increasing.
Coronavirus kept people at home for more than two years. Who benefited from this captive audience? Streaming platforms such as Netflix, HBO Max, and Disney + are more popular than ever. Viewer counts reached a peak in late 2020 with a 44% viewing time increase at the height of the pandemic. Locking yourself in with the television allowed for movie releases to hit streaming services instead of theatres. Streaming platforms are still growing even as the pandemic regulations are lifted. That is except for Netflix.
Netflix dropped to below 50% of the market share for streaming platforms in 2021. Previous projections had Netflix expecting 2.5 million new subscribers. New projections for the second quarter of 2022 show Netflix is now expecting to lose over 2 million subscribers. Netflix has attributed this to increased inflation, an end to COVID boosted growth, and the war between Russia and Ukraine. However, Netflix believes that the biggest problem is password sharing.
In a letter to shareholders, Netflix calls out households sharing accounts as the main reason for the decline other than increased competition. Out of 222 million households with Netflix accounts, Netflix estimates that up to 130 million additional households are receiving services through password sharing. Netflix’s letter to shareholders directly references a plan to confront password sharing. Netflix does not have a new plan to combat competition; they will stick to their original strategy of creating higher quality and more enjoyable entertainment to beat the competition.
Customers aren’t satisfied with Netflix’s plans. Netflix account holders have been in an uproar on Twitter, calling out the practice of monetizing account sharing as greedy and inconsiderate towards users with special circumstances.
The negative reaction is further exacerbated by Netflix’s subscription price increase in January from $13.99 to $15.49 per month. A Netflix spokesperson stated “We’re updating our prices so that we can continue to offer a wide variety of quality entertainment options. As always we offer a range of plans so members can pick a price that works for their budget.”
In April, Netflix announced of a new cheaper subscription plan which would include commercials. This plan received widespread criticism. Some Twitter users say this is the reason Netflix’s subscriber count is tumbling.
“Those who have followed Netflix know that I have been against the complexity of advertising, and a big fan of the simplicity of subscription,… But as much as I am a fan of that, I am 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.”
Reed Hastings, co-chief executive of Netflix
Netflix is not the only streaming platform adding advertising. Disney + and HBO Max have announced cheaper subscriptions that include advertising. Hulu and IMDB TV have always had advertizing. Variety and Vulture speculate that advertising is necessary because these streaming platforms simply cannot grow anymore in this competitive market. Competing in the streaming market requires ever increasing budgets for higher quality exclusive content to capture these consumers being lured away by rival platforms.
So why is Netflix losing market share despite engaging in the same practices as its rivals, Disney + and HBO Max? Analysts at Parrot Analytics, Deloitte and Lightshed Partners speculate that Netflix’s library is the issue. Interest in the movies and shows which Netflix has to offer has plateaued, with no new franchises catching the same interest as those previously hosted on Netflix. Meanwhile, investments into major projects such as a Lord of the Rings TV show have allowed Amazon, Apple, and Disney to capitalize on waning interest in Netflix’s library.
“For every single title on the Netflix catalog, the demand is pretty much flat, …The catalog for HBO Max and Disney+ is growing double digits. That’s a big difference.”
Alejandro Rojas, vice president of applied analytics at Parrot Analytics
