What’s Going On With Netflix? Why Is It Losing Subscribers?

Netflix pioneered the shift to streaming, and for its innovation, the streaming service pulled far ahead of the scrambling competition. Around 220 million people subscribe to Netflix, yet its stock has plummeted 46% on its previous premium. 

The streaming service’s revelation that it had lost 200,000 subscribers, less than 0.1% percent of its customer base, sent share prices into a nosedive as shareholders dumped the stock. Its prediction that it would lose an additional 2 million subscribers in the second quarter of 2022 raised nerves among shareholders.

Nevertheless, many concluded that the loss would be a blip on the radar, and Netflix would recover. However, in mid-May 2022, Netflix laid off about 150 staff due to a slump in the company’s revenue

In light of the recent developments, we’ve decided to take a closer look at what’s going on at Netflix and why it’s losing subscribers. 

The rising cost of living and ever-increasing fees 

The world is experiencing a post-pandemic slump, with the cost of necessities going up by the day. At the same time, Netflix continues to increase its prices. 

For many, you either pay for basic needs or pay for Netflix – and you can’t watch Netflix without paying the electricity bill. “With gas and electricity bills going up massively, you almost worry about switching the TV on at all,” Emma Heath, a British resident who recently canceled her subscription, said

During the pandemic, Netflix added 54.6 million subscribers, and other streaming services saw a rise in subscriptions: there was little else to do during quarantine other than watch television. 

Netflix didn’t expect to see such growth as the world reopened, but the streaming service still projected subscriber increase. However, the financial crisis forced people to do away with most of their pandemic subscriptions. 

“Inflation is going up, the cost of living is going up,” Rua Aguete, senior director of media and entertainment at Omdia, said. “If in 2020, we took six or seven services, do we need them all now?”

Increased competition from other streaming services 

Netflix co-founder and CEO, Reed Hastings (Wolter Peeters/Fairfax Media via Getty Images)

For a time, Netflix was the top dog in the streaming arena. It still is the most popular streaming service, but its competitors are steadily eating away at chunks of its pie by investing in premier content. 

Netflix spent $13 billion on original content in 2021, but statistics show that people are more interested in old hits. Shows like Squid Game, Bridgerton, and Love is Blind justify Netflix’s investment, but who in the world approved Is It Cake?

How often have late-night comedians joked about scrolling through Netflix for hours without finding anything remotely interesting to watch? It’s an experience many of us can relate to – we have a streaming service with plenty of offerings but none worth our time. 

Other cheaper streaming services may have less content but offer more value by including programs like sports and awards shows. Unlike Netflix, they also make us wait for longer between episodes, and people don’t seem to mind. 

Netflix may have to learn from the competition if it’s to stay ahead. It has already said that it might consider a cheaper subscription with ads in line with services like Hulu. 

However, it’s unclear how Netflix plans to deal with the rise in popularity of YouTube and TikTok. Millennials would much rather watch short-form videos for hours than stream television content. Andrew A. Rosen, a streaming service analyst, said:

“If there is a reckoning coming, it’s because all emerging data suggests millennials and Gen Z are not only less interested in streaming TV and film than the previous generation, they are also consuming more content on YouTube and TikTok.”

An increase in password sharing 

In its early 2022 letter to shareholders, Netflix said ‘account sharing as a percentage of our paying membership hadn’t changed much,’ but combined with other factors, password sharing had stifled the membership growth. 

The report stated that 222 paying households shared accounts with over 100 million households. 

In March 2022, Netflix announced a plan to earn from password sharing. The project, which Netflix would test in Chile, Costa Rica, and Peru, involved the addition of cheaper ‘subaccounts’ that would have separate passwords and cater for users outside the account holder’s household. 

Netflix hopes to earn money from this system, but it might backfire on the company. Younger people who were used to sharing passwords – the same demographic that seems to prefer TikTok and YouTube – may feel further left out by the streaming service. 

A look through social media shows that Netflix’s intention to cash in on password sharing has ruffled many feathers. 

Billionaire investors are jumping ship

Three months after billionaire Bill Ackman invested $1.1 billion in Netflix, he pulled out, losing around $400 million.

Ackman took the massive loss because he didn’t believe in Netflix’s prospects. In a letter to Pershing Square Funds, Ackman said that despite the positive steps taken by Netflix, it had become difficult to predict the company’s future accurately. Ackman wrote:

“While we believe these business model changes are sensible, it is extremely difficult to predict their impact on the company’s long-term subscriber growth, future revenues, operating margins, and capital intensity.”

“While Netflix’s business is fundamentally simple to understand, in light of recent events, we have lost confidence in our ability to predict the company’s future prospects with a sufficient degree of certainty.”

The loss of such a huge investor didn’t look good on Netflix. It makes you wonder what Bill Ackman, an experienced investor with plenty of resources, saw to make him leave Netflix at a loss. 

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