Netflix is losing subscribers at a rapid pace. The streaming service blamed password sharing, competition from Amazon’s Prime Video and the success of Game of Thrones as reasons for their stagnant growth. Will these issues affect how Netflix does business in the future?
Netflix is losing subscribers at an alarming rate. The company blames password sharing and other factors for stagnating growth.
Image credit: Netflix
Netflix has addressed a letter to shareholders informing them that the company’s revenue growth has slowed significantly. The letter was released today as part of the company’s most recent financial reports, which were dismal, revealing a 200,000-subscriber loss in the first quarter of 2022.
Netflix has attributed the stagnation to a number of factors, one of which is password sharing: the streaming service claims that over 100 million households are using shared passwords to watch The Witcher, Ozark, and other hit shows for free, with 30 million freeloaders in the United States and Canada alone.
Alternative factors given by Netflix for its poor performance include rising bandwidth prices, more competition from other streaming providers, and inflation. Netflix’s move to raise the price of its monthly membership tiers is unlikely to improve matters.
Shareholders’ Letter (Netflix Investors)
First, it’s becoming clear that the rate of growth in our underlying addressable market (broadband homes) is influenced by factors we don’t have direct control over, such as the adoption of connected TVs (since TVs account for the majority of our viewing), on-demand entertainment adoption, and data costs. We think that these elements will continue to improve over time, making all broadband homes Netflix members.
Second, we believe that Netflix is shared with approximately 100 million more homes, including over 30 million in the UCAN area, in addition to our 222 million paying households. Account sharing as a proportion of our paid membership hasn’t changed much over the years, but when combined with the first point, it’s becoming more difficult to build membership in many areas – a challenge that has been overshadowed by our COVID growth.
Third, over the last 15 years, watching competition has been fierce between linear TV, YouTube, Amazon, and Hulu. However, as conventional entertainment corporations understood that streaming is the way of the future, several new streaming services have emerged in the previous three years. While our television watching share in the United States has been steadily increasing, according to Nielsen, we aim to increase that share even more quickly. A higher view share indicates more pleasure, which leads to increased retention and income.
Fourth, macro variables such as slow economic growth, rising prices, geopolitical events like Russia’s invasion of Ukraine, and some ongoing COVID disruption are all likely to have an influence.
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The “why did netflix stock drop today 2022” is a question that has been asked by many people. The answer to the question is that Netflix lost 200,000 subscribers in Q1 of 2022. This caused Netflix’s stock to drop by 10%.
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