It’s no secret that Netflix has been coming under fire recently, with negative reactions to the price hikes and worries about the company cracking down on password sharing – plus ever-growing competition from rivals. Now, the king of streaming services is starting to feel the heat.
Yesterday was the company’s first investor call of the year, and the
numbers themselves are rather grim. Netflix made a loss of subscribers in the first quarter of 2022, with 200,000 users leaving the platform – way under its target of gaining 2.5 million subscribers.
Granted, during this time the company closed its doors in Russia following the country’s invasion of Ukraine, where it served 700,000 subscribers. So technically, the company is up by 500,000 subs so far this year. However, things get more concerning when you look at the projected figures for the next few months, when Netflix expects to lose two million more subscribers.
Alongside all this, Netflix co-CEO Reed Hastings suggested that for the first time the platform will explore launching an ad-supported tier in the next year or two – something that Hastings himself has previously
However, Netflix doesn’t really have much of a choice at this point. HBO Max already undercuts
Netflix’s Premium tier by half with its ad-supported offering. Meanwhile, Disney+ confirmed that at the end of 2022, it will also offer a
cheaper, ad-supported subscription which we estimate to be priced at less than $5, a cost that would undercut even Netflix’s Basic tier.
Even with staple shows such as
Better Call Saul, Ozark, and
Stranger Things returning soon, it won’t be enough for those who are struggling to pay the bills. Just before the investor call,
Fandom released its State of Streaming report, exploring what its readers factor in when choosing a streaming service.
The study reported that 76% of respondents cited monetary reasons as the number one factor in cancelling a streaming service. In addition, users surveyed believe that Netflix is only worth around $10 a month – half of the cost of the Premium tier in the US.
The report also summarised that a saturated market is spreading costs too thin for users, with people having to choose between platforms based on what content they prefer. As I explored before when
analysing the new cost of the Premium tier, Netflix has no discounts or incentives for subscribers, so it’s an easy option to ditch.
Netflix didn’t hint at the price of its future ad-supported tier, but it will have to be extremely competitive to help claw back the losses it is making this year. In addition, it shouldn’t limit the option to just the Basic tier, which offers only 480p quality and no simultaneous streams. This will only make the streaming experience worse, and not paint the new tier in a good light.
The company does have a few more ideas to help generate revenue, which includes doubling down on plans to
limit password sharing.
Hastings stated the following in a video about the quarter’s earnings: “We’re working on how to monetise sharing… Remember, there are over 100 million households that already are choosing to view Netflix. They love the service. We’ve just got to get paid in some degree for them.”
Whilst the numbers on paper show that Netflix could theoretically make back revenue on extra users, people actually paying for it is another matter entirely. Huge numbers of family members and friends share Netflix purely to keep prices down. Adding on additional costs when the service is already one of the most expensive out there is not a smart move.
Another way that Netflix is planning on saving on the purse strings is to pull back on the amount of content it is making – something that should have come much sooner.
Whilst Netflix prides itself on its churn model, it’s debatable whether these long lists of mediocre (and in some cases, poor) shows and movies are contributing to subscriber growth. Plus, the amount of bad content highly outnumbers the best stuff on the platform – for every The Power of the Dog, there are ten Tall Girls.
Both HBO Max and Disney+ have proven that investing in a handful of series and films per year (like The Mandalorian or Euphoria) can target specific audiences and spend money more effectively.
The company has also lent into other forms of additional content, like the editorial site
Netflix Tudum and its
Games section. However, the former acts more of a content marketing platform that currently anyone can access, whilst the latter is still very much in the early stages of rolling out. The service is not incentivising enough for people to stay.
At the end of the day, people will fork out a subscription for a streaming service if it provides something competitive, and Netflix’s prices right now are anything but that.
The company can’t exactly walk back the
price hikes, but a cheaper, ad-supported subscription (that offers a higher quality than SD) could just be enough to draw subscribers back in the future, or even attract new users tempted by the lower price.
But the platform has got to act soon because those subscriptions are ever-dropping, and Disney’s cheaper tier will likely come to market before Netflix even gets the ball rolling.
What I’m watching this week
I’m now four episodes into
Moon Knight, and when the show’s trailer told us to “embrace the chaos,” it truly meant it. This newest Marvel series follows Steven Grant, a mild-mannered gift shop employee who has a sleeping disorder.
One day, he wakes up somewhere he is not supposed to and discovers that there is way more to his life than he ever imagined. Don’t let the dark tone of the trailer deceive you – there are plenty of whacky and goofy moments, especially when it comes to Oscar Isaac’s very questionable British accent.
You can catch Moon Knight on
Disney+ – subscriptions cost £7.99/$7.99 per month or £79.90/$79.99 per year.
You can also read up on how the news-focused streaming platform
CNN+ is shutting down after just a month.
Hannah Cowton is a Senior Staff Writer at Tech Advisor and Macworld, working across entertainment, consumer technology and lifestyle. Her interests and specialities lie in streaming services, film and television reviews and rumours, gaming, wearables and smart home products. She's also the creator of The London Geek, a geek culture and lifestyle blog.