Streaming service and production giant Netflix has announced that it has lost subscribers for the first time in decades. The company has admitted that revenue growth has been slow, in a new quarterly report.
Netflix has reported in its Q1 2022 that it lost 200,000 subscribers for the first time in decades, blaming password sharing and increased competition for the significant downturn in the interest of the company.
In a letter to its shareholders, Netflix told them that the reasons mentioned above led to slow growth of revenue and loss of subscribers as well as the decline in the COVID-19 pandemic:
“Our revenue growth has slowed considerably, our relatively high household penetration – when including the large number of households sharing accounts – combined with competition, is creating revenue growth headwinds. COVID clouded the picture by significantly increasing our growth in 2020, leading us to believe that most of our slowing growth in 2021 was due to the COVID pull forward.”
The company ended the first quarter of 2022 with 222 million subscribers, still making it the largest streaming service. However, the new numbers will cast doubts on Netflix as the streaming king for who knows how long, adding new challenges to the company as a whole.
Also in the report, the company has stated that it lost 600,000 subscribers in both the U.S. and Canada mainly due to the price hikes that were triggered earlier this year, as it was “largely the result of our price change which is tracking in-line with our expectations and is significantly revenue positive.”
Following the release of the report, Netflix’s stock sharply fell, indicating that a further drop in revenue will be catastrophic for the streaming giant.
Just in- Netflix has lost 200,000 subscribers for the first time in the March quarter. The company estimates it could lose up to 2 million subscribers in the second quarter. $NFLX pic.twitter.com/q00lYGbhGw
— Heedo Abu Laban | عبد الحميد | 𓂆 (@HeedoAbuLaban) April 19, 2022
In January, the streaming service announced price hikes in the three plans it provides: Basic, Standard, and Premium.
- Basic – $9.99/mo (previously $8.99/mo)
- Standard – $15.49/mo (previously $13.99/mo)
- Premium – $19.99/mo (previously $17.99/mo)
The company has stated that in order to keep its business afloat, it will maximize efforts to produce more content i.e. more originals to keep consumers subscribed:
“Our plan is to reaccelerate our viewing and revenue growth by continuing to improve all aspects of Netflix — in particular the quality of our programming and recommendations, which is what our members value most, On the content side, we’re doubling down on story development and creative excellence.”
Finally, the company has promised to crack down on password sharing – one of the biggest issues the streaming service has witnessed – as it states that while 222 million households are paying, it is estimated that 100 million “additional households” are not. 30 million of which are in the U.S. and Canada alone.
The report states that from the results, the company estimates that it will lose up to 2 million subscribers in the second quarter of 2022. In March, the streaming service was suspended from Russia following the Russian invasion of Ukraine, resulting in a loss of 700,000 subscribers there.
Since 2019, competition regarding streaming services (dubbed the Streaming Wars) has been on the horizon. Apple launched Apple TV+ and has been ever-expanding significantly due to the increased library of premium original content.
Disney launched Disney+ which houses Disney, Pixar, Marvel, Star Wars, and National Geographic content and has been rapidly expanding globally, from North America to Europe, to the Asia Pacific region.
The same statement can be told on Amazon Prime Video, HBO Max, Paramount+, Peacock, and much more. Due to this increase in services, Netflix has felt a business earthquake that will reshape how consumers watch content.