Netflix is a household name by now. In the pandemic period, it is one of the things that has kept plenty sane and pass their time while they are completely cut off from the outside world. It is, after all, one of the largest, if not the largest entertainment platform currently known to man. During the pandemic period, they really thrived.
Fast forward to today, the world is in a stark contrast compared to when the COVID-19 pandemic started. We are better at dealing with it now, we have vaccines, people are allowed out of their homes, things are returning to normal. That also means that you now have less time to enjoy Netflix and to catch up on your movies and TV shows.
No matter, Netflix still predicted that they are going to increase their membership base in 2022. For the first quarter of 2022, Netflix has just released their earnings report. The numbers do not look good, nor reflected Netflix’s 2022 projections.
The report from Netflix shows that they have lost a significant number of subscribers for the first time in 10 years. If we read their reports correctly, Netflix has reported a loss of 200,000 subscribers in the first quarter of 2022 alone. In contrast, the first quarter of 2021 saw nearly 4 million new subscribers. While 200,000 subscribers may sound significant, the entire of 2021 saw Netflix gain nearly 20 million new users. There is more concerning news for Netflix shareholders in the reports though. Netflix is expecting to lose about 2 million subscribers in the coming quarter of 2022, a significant dent in their dominance over their market segment.
Despite the rather crowded space that is the over-the-top (OTT) on-demand streaming industry, Netflix is not blaming its competition for the lost of subscribers. They are rather blaming users for their loss in market share. They specifically mentioned that the 200,000 lost subscribers are lost to users who are sharing their accounts. In their reports, Netflix estimates that among their 222 million users, 100m of them are sharing their accounts. Of course, they cited that the current development in Russia and Ukraine is not helping the situation.
Taking on Shared Accounts
Netflix has been citing shared accounts to be an issue for a while now. In their ideal world, every user with a Netflix account is individual users with their unique accounts. Inevitably, there will be people who shares single accounts to enjoy their shows at different times. In Malaysia at least, we have specific accounts that is made specifically for sharing with up to five users anyway.
Still, we are not referring to that though. Netflix refers to users who are using accounts made for a single individual and sharing the same account with the household, or friends. According to Netflix, the more than 100 million households that are using accounts owned by another household are opportunities for increased revenue. In that sense, Netflix is looking into ways to monetise account sharing soon.
To be fair, Netflix has been toying with the idea of charging customers more for accounts that are being used in households other than your own. The idea is to have a sub-account to the main account where users have their own unique login and password. That way, all watch history, lists, recommendations can be tailored to that single user. It also allows Netflix to identify that sub-account to be a unique user, obviously. The solution was first tested in Chile, Costa Rica, and Peru. There are no reports on the success of the program. We must assume that Netflix achieved some success in the tests though because they are planning to bring the solution to the global market. How much more it will cost users will be the only big question mark currently.
Low-Cost Netflix, but with Ads
Amidst the tough competition that Netflix is now facing, they are also leaving no stone unturned to gain more market and mindshare. Reed Hastings, co-founder and CEO of Netflix has mentioned that they are now quite open to offering plans at lower costs with ads infused into the plan as an option. He says that the company is working on a solution and plan option to be introduced within a year or two.
Hastings was strongly against putting ads into Netflix and its subscription plans. He cited before that adding advertising into Netflix adds a tonne of complexity that users might not enjoy. He added that he favours the rather simple subscription model that Netflix has been offering thus far.
The move into having advertisements in Netflix is not just to fatten up the entertainment company’s pockets though. In effect, it is supposed to also bring subscription costs down while allowing Netflix to maintain their margins. At the same time also, it could be a viable path for Netflix to finally bring Live Sports as a part of their offerings. We are imagining watching F1 on Netflix without having to make any work arounds here.