Netflix Loses Total Global Subscribers

Netflix, the world’s largest streaming service, saw a dip in subscribers globally for the first time since October 2011. At the end of the first quarter, the company reported 221.6 million global subscribers, a loss of 200,000 and a miss of the projected 2.5 million net adds. That’s a far cry from the 8.3 million added last quarter, 1.2 million of those coming from North America. In an even bleaker outlook, Netflix is projecting it will lose another 2 million in the second quarter, despite the return of popular series such as Stranger Things and Ozark. With 221.8 Million Global Subscribers, Netflix Still Has ‘Tremendous Room for Growth’ Netflix hiked prices in January in the U.S. and Canada for the first time since 2020 in a move designed to drive revenue, but it also resulted in reduced churn. Netflix lost 600,000 customers in the region this quarter, which it said was due to the price change and in line with expectations. While the streamer added subscribers in the U.S. and Canada last quarter, it previously lost 433,000 in the third quarter of 2021. The dip also comes just a quarter after the company said it still has “tremendous room for growth.” The streamer did forecast slowing growth as it faces increased competition from other services like Disney+ and HBO Max, but a letter to shareholders posted Tuesday afternoon blamed four other reasons for the stagnation. Allowing consumers who would like to have a lower price and are advertising-tolerant [to] get what they want, makes a lot of sense.Reed Hastings, Netflix chairman Netflix pointed to “factors [it] doesn’t directly control” related to broadband homes, including the uptake of connected TVs, video on demand and data costs. However, the company noted it still expects those factors to improve over time. It also blamed password sharing, estimating that in addition to the 221.6 million subscribers, Netflix is also in 100 million more homes, including over 30 million in the U.S. and Canada. “Account sharing as a percentage of our paying membership hasn’t changed much over the years, but, coupled with the first factor, means it’s harder to grow membership in many markets—an issue that was obscured by our Covid growth,” the company said in the letter. Netflix previously indicated it would crack down on password sharing, rolling out a test in three countries that will allow the primary account holder to pay an additional fee to share its account with users outside of its household. “There’s a broad range of engagement when it comes to sharing households from high to occasional viewing,” the company said. “So while we won’t be able to monetize all of it right now, we believe it’s a large short- to mid-term opportunity.” Netflix once again pointed to increased competition from streaming services. Despite being the largest platform by nearly 100 million subscribers, others in the space are rapidly catching up. Disney alone has 196 million global subscribers across its platforms, led by Disney+ with 129.8 million. “Competition for viewing with linear TV as well as YouTube, Amazon and Hulu has been robust for the last 15 years. However, over the last three years, as traditional entertainment companies realized streaming is the future, many new streaming services have also launched,” the company said. That competition might get even tougher coming up. Disney+ will debut a cheaper ad-supported tier later this year, and newly-minted Warner Bros. Discovery plans to consolidate HBO Max and Discovery+ into a single service, indicative of the company’s streaming-centric plans. Fourthly, Netflix pointed to global macro factors like Covid-19 and the Russian invasion of Ukraine as a reason for the slowdown. The streamer lost 700,000 subscribers in Russia after suspending service in the country. Netflix saw its first-quarter revenue grow 10% to reach $7.87 billion and projects to break $8 billion next quarter, but shares still tumbled down more than 25% during after-hours trading. An ad-supported future In a reversal of a years-long position, an advertising tier may be coming to Netflix. Company co-founder and co-CEO Reed Hastings said during the company’s pre-recorded earnings interview Tuesday that Netflix is considering experimenting with lower-cost, ad-supported packages. “Those that have followed Netflix know that I’ve been against the complexity of advertising and a big fan of the simplicity of subscription,” said Hastings. “But as much as I’m a fan of that, I’m a bigger fan of consumer choice. And allowing consumers who would like to have a lower price and are advertising-tolerant [to] get what they want, makes a lot of sense.” The reversal comes after Disney+, arguably Netflix’s most significant competitor, announced its upcoming ad-supported tier. HBO Max with Ads launched last year, and Peacock has leaned on an ad-supported model since its launch. “It’s working for Hulu, Disney’s doing it, HBO did it,” said Hastings. “All these companies have figured it out. I'm sure we'll just get in and figure it out, as opposed to test it and maybe do it or not do it.” Double down on content To combat the streaming slowdown, Netflix is further investing in content, pointing to the success of Season 2 of Bridgerton and breakout films like The Tinder Swindler and The Adam Project. The first-quarter results are just the second time the company measured its releases in its “minutes viewed” metric. Season 2 of Shonda Rhimes’ period drama Bridgerton had a big first quarter, generating 627 million hours viewed in its first 28 days, making it the most-viewed English language series in the company’s history. Another Rhimes hit, Inventing Anna, saw 512 million hours viewed, and Tinder Swindler (166 million hours) became the streamer’s most-watched documentary film ever. Ryan Reynolds-led film The Adam Project pulled in 233 million hours. “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, which we see reflected in big Q1’22 TV hits,” the letter reads. The streamer is also continuing its push into mobile games, announcing just yesterday a new Exploding Kittens mobile game to go alongside the new adult animated series debuting next year. To Cut Streaming Churn, Both Added Value and Content Are Key

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Netflix Loses Total Global Subscribers for the First Time Since 2011

Streamer is considering ad-supported tiers for the first time

Mollie Cahillane

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