The fairy tale was bound to end. But it took everyone by surprise just how suddenly Netflix’s house of cards can topple. In January’s quarterly earnings results, Netflix was still expecting a growth of 2.5 million subscribers in the first quarter of 2022. Instead, in today’s earnings results, it announced a loss of 200k subscribers, which includes the 700k subscribers lost from suspending services in Russia.
The news wiped 26% off Netflix’s share price in after-hours trading.
The good news for Netflix is that it still has 221.6 million subscribers, its first-quarter revenue grew 10% to US$7.87 billion, and it still maintains its streaming share lead against competitors such as YouTube, Hulu, Amazon, Apple, and Disney.
On the other hand, Netflix expects to lose another 2 million subscribers in the coming quarter. To stop the haemorrhage, CEO Reed Hastings is now open to the idea of a cheaper ad-supported subscription plan.
“Those who have followed Netflix know that I’ve been against the complexity of advertising, and a big fan of the simplicity of subscription,” Netflix CEO Reed Hastings said. “But, as much as I’m a fan of that, I’m a bigger fan of consumer choice.”
Netflix is also currently testing out how to generate revenue from customers who share their passwords with friends or family outside their homes. Currently, more than 100 million customers are using shared passwords to access the streamer, which is against Netflix’s terms of service. So in March, Netflix gave customers in Chile, Costa Rica, and Peru the option to pay an extra fee to legally share their accounts with two people outside of their household.
Depending on how that turns out, it means Netflix may soon put in place tools to prevent multi-household password sharing. This may already be a factor in why it is expecting 2 million subscribers to hit unsubscribe soon.
However, it’s not all doom and gloom for consumers. If Netflix actually rolls out a cheaper ad-supported plan, that could still be a win for many of us. In the longer term though, Netflix will need to take a deep look at why subscribers are leaving, with claims that the quality of service not improving in tandem with the increase in subscription price being the most commonly raised frustration.
Jimmy is on a never-ending quest to finish his ever-expanding library of games, but he keeps getting sidetracked by a mountain of books to read, and a trail of actual mountains he hopes to climb.
Trinity Sun
Natalie
