Why Is Netflix Losing Traction?

To renew or to cancel: here is a list of reasons why Netflix subscribers are switching off. 

When the pandemic hit in 2020, everyone was forced into their houses and left with a limited amount of options on what they could do. With nothing to do and a lot of free time, people took to binge-watching. The binge-watching trend was a boon for over-the-top (OTT) streaming services, with Netflix being one of the biggest winners. The company amassed 36 million new subscribers in 2020; however, when 2021 rolled in, their subscriber growth diminished. 

Netflix’s downward trajectory has continued since then, with reports stating that as of April this year, Netflix has lost 200,000 subscribers and is expected to further lose 2 million subscribers in the next three months. For those of us who Netflix and chill every weekend, this definitely comes as a shocker. Let’s take a look at the reasons leading to the decline of the biggest streaming service in the world and whether this signals a long-term problem for the company. 

Reasons behind Netflix’s subscriber loss

Growing competition

The key reason behind the loss of subscribers is increasing competition in the streaming service market. Since 2019, many new streaming services, like Disney+, HBO Max and Paramount Plus, have entered the space. With new providers entering the market, content creators no longer need to turn to just Netflix to reach a global audience. For instance, the beloved American sitcom Friends, is moving from Netflix to HBO Max, reducing the amount of content available for Netflix subscribers. 

Besides, the different streaming platforms also have their own specific niche content. For example, Marvel fans or those who love Disney’s classic fairy tales, like Cinderella or Aladdin, will most likely choose Disney+ rather than Netflix. 

Raised prices for Netflix subscriptions  

The growing competition is not limited to content. Netflix is also in a price battle with all these streaming services. Netflix increased its prices earlier this year, taking its standard plan from US$13.99 per month to US$15.49. This made Netflix the most expensive streaming service in the U.S., which is one of Netflix’s biggest markets. 

Password sharing

Netflix has 222 million subscribers across the world. However, this number is lower than it should be due to people sharing Netflix passwords with each other. The company says that its 75 million household user base in the U.S. and Canada would be 105 million if shared passwords were accounted for.  

Growth of the freemium streaming model

Taking a look at countries besides the U.S. reveals that the popularity of regional streaming services has also been increasing in recent years. Some of the biggest players in Asia, including Disney+ Hotstar, Viu and Tencent Video, not only give people content in their regional languages but also provide a “freemium” model (free content with advertisements) of content streaming. If users can get content that they resonate with and that too for free, why would they want to pay for Netflix? It is perhaps because of this exact reason that APAC represents the smallest pool of Netflix subscribers, despite being the most population-dense region in the world. 

Loss of Russian subscribers

Perhaps one of the most recent reasons for this fall in subscribers is the Russia-Ukraine crisis. To show their disapproval of Russia’s decision to launch an armed attack on Ukraine, a lot of companies, like McDonald’s, Starbucks and Samsung, have stepped out of the Russian market. Similarly, Netflix pulled out of Russia this year, which reduced its subscriber count by 700,000.   

Netflix’s next steps 

The biggest question is: What is Netflix doing to stop a fall in subscribers? Well, for starters, the company is planning to increase its subscriber base by introducing an ad-supported, lower-priced subscription tier. It is also trying to crack down on password sharing and has begun charging an extra fee for password sharing in Latin American countries, like Peru and Costa Rica. Users will be able to add two to three additional profiles to their accounts by paying an additional US$2-US$3 a month. However, experts warn that this extra fee, as well as Netflix’s overall rising costs, might backfire at a time when the cost of living continues to rise. 

Instead of the strategies that Netflix is currently trying out, some suggest that creating buzzworthy content and curating a catalog of bingeworthy shows and films that keep people watching is the best way to increase its subscriber base.

For now, the fall in subscribers doesn’t bode well for the future of Netflix. The company lost 37% of its share value after the fall in subscriber count became public. However, it is important to remember that the current fall in subscribers does not take into account the possible growth the platform might have seen with the launch of the second season of the hit series Bridgerton and the release of the Adam project. Both were released in March and contributed to 627 million hours and 233 million hours of watch time each. However, due to their late entry into Netflix’s catalog, they couldn’t play a big role in its quarterly report. Hopefully, Netflix’s popular original content will keep the company afloat as it faces turbulent times. 

Also read:

• Is “Freemium” the Way to Go For OTT Platforms In APAC?
• Netflix Forays into Video Games with Night School Studio Acquisition
• Squid Game and Its Lessons on Entrepreneurship

Header image courtesy of Unsplash