James R | On 20, Apr 2022

The number of Netflix subscribers has fallen for the first time in more than a decade.

The streaming service saw its overall number of households drop by 200,000 in the first three months of this year, the first time it has seen a quarterly drop in net total customers since October 2011. The service, which has more than 220 million subscribers worldwide, remains the biggest player in the streaming game, but a combination of circumstances and market shifts have left the company underperforming against expectations.

One of the major factors is the growing competition that Netflix is facing from newer rivals such as Disney+, HBO Max, Apple TV+ and NBC’s Peacock, not to mention longstanding rivals such as Amazon Prime Video and Sky. With other options increasingly available to viewers, audiences are looking elsewhere for entertainment – and, at the same time, Netflix is racing to invest in new original programming to make sure that its library, initially composed of titles licensed from third parties, still has exclusives to attract audiences. The streamer recently raised its monthly subscription fees to generate revenue that can offset this investment, which means that the majority of its rivals are also cheaper.

The company recently stopped providing its service in Russia in response to the war in Ukraine, which cost it 700,000 subscribers, but that is only one element of the changing headwinds facing the firm, with the cost-of-living crisis in the UK leaving many people re-evaluating how much money they’re spending on streaming services each month, while the lifting of Covid-19 restrictions has also meant that audiences are less reliant on streaming services to keep them entertained indoors. As for Netflix itself, the company has attributed some of the blame to the number of customers sharing passwords to their accounts with other households, which is costing the company potential revenue from additional accounts.

In a letter to shareholders, Netflix alludes to cracking down on that practice, speaking of “more effective monetisation of multi-household sharing”. Netflix has been running a trial in three Latin American markets that allows customers to share accounts with additional households at a discounted rate, which may well be rolled out to additional countries.

“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,” said CEO Reed Hastings. “On the content side, we’re doubling down on story development and creative excellence, which we see reflected in big Q1’22 TV hits like Bridgerton (627 million hours viewed for Season 2, the biggest English language series in our history) and Inventing Anna (512m hours viewed) – both from our extremely successful partnership with Shonda Rhimes – and films like Tinder Swindler (166m hours viewed, our biggest documentary film ever released).”

Otherwise, Netflix appears bullish and argues that “average revenue per membership, revenue and viewing will become more important indicators of our success than membership growth” in the future. Indeed, it has recently begun publishing a list of the most popular titles on the service in a bid to highlight the number of hours people have watched its films and series.

Nonetheless, things are far less simple than they once were, with Netflix forecasting its total number of subscribers to drop again by 2 million in the next three months. Shares in the company dropped more than 25 per cent following the announcement of the quarterly results.

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