Netflix has reported a loss of 200,000 subscribers so far this year — the first time the customer base has declined in 11 years.
As Bloomberg reports, the bleeding may have only begun. In an earnings report, Netflix said it expects to lose an additional two million subscribers in the second quarter of 2022.
This is despite the fact that Netflix signed up an additional one million new users in Africa during the first quarter. Those gains were offset by losses across the rest of the globe, especially in the US and Canada, where 600,000 people cut their service after a price hike, and in Russia, where the company lost another 700,000 subscribers after ceasing operations in response to the invasion of Ukraine.
The Big Red N boasts a total of about 221.6 million subscribers, but that doesn’t include an estimated 100 million households which are benefitting from password sharing. Netflix sees this non-paying population as vital to its growth, which is one of the reasons that it began to test a password-sharing fee last month.
In a letter to shareholders, Netflix wrote, “The big Covid boost to streaming obscured the picture until recently,” but added that the company remained optimistic. “Our relatively high household penetration — when including the large number of households sharing accounts — combined with competition, is creating revenue growth headwinds,” management said.
Part of the plan to win back users is a newly-announced cheaper, advertising-supported pricing tier. “Those who have followed Netflix know that I have been against the complexity of advertising, and a big fan of the simplicity of subscription,” co-CEO Reed Hastings said today. “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.”
This new pricing option will become available “over the next year or two.”
Netflix remains by far the most successful outsider streaming platform in an industry that has become increasingly dominated by large corporations. Disney+ launched in November of 2019, HBO Max (with the weight of Warner Bros. behind it) followed in May 2020, Peacock and NBCUniversal were close behind in July, and Paramount+ debuted in March of 2021. Besides that, older platforms such as Hulu and Amazon’s Prime Video have continued to invest in new content.
Netflix shares fell over 24% at news of the loss. It remains the largest streaming platform in the world.