What Happened to Netflix?

When the pandemic hit, things were very good for Netflix, just as things were good for all kinds of businesses that ask you to do nothing more than sit on your ass. But now Netflix is an expensive, swollen monster of a company that’s not very different from its competitors. Why pay $20 a month for a premium subscription when you’re not even sure if that new show you want to watch is Apple+, or Disney+, or Hulu?

During the first three months of this year, 200,000 subscribers decided they’d had enough. This is the first time Netflix has lost subscribers since 2011, according to the number crunchers at Bloomberg. And it’s getting worse: Netflix predicts that another 2 million paying subscribers will bolt by the end of June.

Netflix is still huge — it has 222 million subscribers worldwide — but about 100 million households are sharing passwords, with about a third of those in the U.S. and Canada, according to the company. That may end soon, though, as the company pilots more expensive account-sharing programs in Chile, Costa Rica, and Peru. And more than that, the pandemic economy is crumbling under two strains: the fact that people are leaving their homes and the fact that just about everything is getting more expensive.

Netflix CEO Reed Hastings blamed several factors, including suspending 700,000 accounts in Russia because of the Ukraine invasion. The supposed end of the pandemic’s TV bingeing and password-sharing were other cited factors. Also, traditional broadcasters are gaining a foothold online and are holding back their beloved IPs from the streamer. Traditional broadcasters and Disney alike are unlocking huge archives that arguably represent better value for money. Hastings notes Netflix will introduce an ad-supported tier in the next two years. 

According to CNBC:

Netflix (NFLX) shares plummet in premarket trading after the streaming company reported a loss of 200,000 subscribers during the first quarter. Why? 1. Tech is beyond their control; 2. 100 million users are cheating by sharing subscriptions outside their households … really? 3. More competition; 4. Ads? Profitable hit-driven business with giant cost structure, but also many good franchises. 

Source: New York Magazine and CNBC and The Drum