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After a decade of growth, Netflix lost 200,000 subscribers in a quarter. While blaming account sharing, the streaming giant opens the door to advertisements … but is careful not to mention lower prices.
Last January, when announcing its results for the last quarter of 2021, Netflix bulged its chest… while displaying some reservations. With nearly 222 million subscribers worldwide, the market leader boasted stronger positions than ever, but still worried about a slight slowdown in recruitment. Cautious, he then announced a fairly modest target of 2.5 million new customers for the first quarter of 2022. The reality turned out to be quite different.
For the first time in ten years, the uninterrupted growth of the giant of Los Gatos came to a sudden halt. Netflix has lost 200,000 subscribers in the past three months, with their number reaching 221.64 million. Results that made him rather pessimistic for the rest of the year, with a decline of 2 million additional customers expected in the next quarter. Its stock fell more than 22% in the wake of the announcement.
Netflix wants “monetize“account sharing
To explain this rather drastic drop, the platform first pointed to the cut in its services in Russia, without which it would have won 500,000 customers, according to its calculations, then growing competition in which Paramount+ or the new Discovery+/HBO Max duo. But the other big culprit long identified is account sharing. For Netflix, more than 100 million households worldwide use credentials from other accounts, including more than 30 million in North America alone. Until then, this phenomenon would have been masked by the meteoric growth recorded during the health crisis, but it now appears to be a huge thorn in the side of the firm of Reed Hastings and Ted Sarandos.
In its letter to shareholders, Netflix thus affirmed its desire to find “the best way to monetize sharing“, seeing there a “great opportunity, as these households are already watching Netflix and enjoying our service“. An experiment has also been launched recently in three South American countries, where subscribers can add accounts outside their homes for around €2 extra per profile. According to estimates by financial analysts, the industry leader could reap an additional $1.6 billion per year if this practice were democratized.
Advertising, yes; price reductions, especially not
Another means of stemming this slowdown in growth could be on the advertising side. You know this if you are an avid reader of Digitalfree or low-cost streaming by watching a few advertisements (AVoD, advertising-based video on demand in English) has the coast across the Atlantic, to the point that Disney + will rub shoulders with it very soon. So far, the service of Los Gatos had always been reluctant to this eventuality. But this time, circumstances prompted Reed Hastings to step in: yes, cheap ad-supported options are coming to Netflix.
Finally, the two leaders maintained the objective of spending 18 billion dollars on content this year, but in a way “smart and careful” according to Spencer Neumann, the company’s financial director. Understand that the series will have to show great performances to hope to be renewed, on the contrary, for example, ofArchives 81recently cancelled.
As always, we regret for our part that Netflix pretends not to see the elephant in the middle of the corridor: the rise in the price of subscriptions. In 2021, customers in many countries – including France – saw their bills increase without any real justification, which probably generated a potentially significant exodus and growing reluctance to take the plunge among non-subscribers. The worry is that despite sluggish hiring, Netflix beat Wall Street earnings expectations, with revenue up 9.8% from Q1 2021. Not sure. that the firm is less greedy in the months and years to come.