With the advent of Disney+, HBO Max, Apple TV and Amazon Prime, Netflix finds itself locked in a fierce battle – one in which it suffered a loss of almost a million subscribers between April and July.
As the number of people quitting the service accelerated, Netflix’s chief executive Reed Hastings admitted that what may have stopped an even larger exodus of subscribers “was a single thing, we might say ‘Stranger Things’.” But while the new season of the drama of paranormality has been a roaring success, the throes of its producer are difficult to hide and by far not unilateral.
The rampant inflation experienced worldwide is taking a heavy toll on people’s finances pushing them to cut expenses.
After the company in April reported its first subscriber loss since 2011, news of hundreds of jobs being cut and a sharp drop in its share price followed. The biggest subscriber loss in the firm’s history, however, fell on Tuesday, with the largest number of cancellations recorded in the US and Canada, followed by Europe.
On top of that, rival streaming platforms such as Disney+, HBO Max, Apple TV and Amazon Prime were putting Netflix’s dominance in question.
It was “inevitable” that Netflix would start losing its grip on the market, Guy Bisson, executive director at Ampere Analysis, said. “When you’re the leader, there’s only one direction to go, especially when a large amount of competition launches, which is what Netflix has seen in the last couple of years.”
One thing Netflix cannot be denied is that it revolutionised the world of audiovisual entertainment, with its position as the single undisputed overlord bolstered by the 2020 pandemic outbreak which kept people at home with engrossing stories of Squid Game and The Crown within reach.
The challenge for the giant is to attract new sign-ups and maintain the loyalty of existing customers but now with the pandemic in retreat, people enjoying summer, the growing competition and the inflation-induced belt-tightening, the conditions are not as favourable for Netflix as they used to be. Not to forget, Netflix’s decision to make its service more expensive is yet another spanner in its works.
But as Mr Bisson noted, “at some point, yes, they’re going to reach a threshold where a significant number of people say enough is enough. Because of the additional choice… price hikes are a more risky strategy.”
‘Add a home’
What may discourage new and drive away current customers, is also Netflix’s unveiling of an “add a home” feature, allowing users outside the account holder’s household to stream Netflix content – for a price. In reality, the company’s move is designed to curtail account sharing – a praxis that limits the number of new viewers and thus incomes. This, unintentionally customer-unfriendly move, may backfire bringing about market losses for Netflix.
Still, many households continue to identify Netflix as their go-to entertainment platform, the company boasted about 220 million subscribers at the end of June – a quota that puts it well ahead of its competition.
What has come across as worrying is the company’s largest slowdown in years, with revenue in Q2 of USD 7.9 bn, up just 8.6 percent y/y. Meanwhile, the company’s share price has dropped more than 60 percent so far this year, as investors sour on its prospects.
“Netflix’s subscriber loss was expected but it remains a sore point for a company that is wholly dependent on subscription revenue from consumers,” said Insider Intelligence analyst Ross Benes. “Netflix is still the leader in video streaming but unless it finds more franchises that resonate widely, it will eventually struggle to stay ahead of competitors that are after its crown.”
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