Netflix’s stock shares plummeted after the company disclosed a net loss of over 200,000 customers globally with a further two million loss expected in the next three months. Following their announcement, the share price fell 35%, wiping out around $55 billion of its value. There have been other effects as well, the most significant of which is the cancellation of many Netflix Originals, which had proven to be a big hit for the platform.
According to The Wrap, an entertainment news organization, “The streaming giant has pulled the plug on numerous in-development Netflix shows. The company’s animation department has been hit hardest by the issues currently plaguing Netflix, which has suffered downturns in its market value and subscriber base since the turn of the year.”
Netflix’s recent membership decline is the greatest it has been in over a decade, and the streaming service expects to lose another two million paying customers by June of 2022. Netflix’s 9.8% yearly increase, according to the Quarter 1 2022 shareholders’ letter, is also the company’s worst quarterly growth since the pandemic. Netflix has seen a steady slowing in its financial expansion over the last 12 months.
Netflix has already reacted quickly to this situation. To address subscriber losses, the business intends to tighten down on the more than 100 million homes that share passwords and provide a lower, advertisement-supported membership tier. Netflix has over 222 million subscribers worldwide. However, in the United States and Canada, its largest markets, 75 million out of a total of 142 million households have a Netflix membership. When you factor in password sharing, which Netflix claims accounts for 30 million more homes utilizing the service in North America, it’s obvious that Netflix is competing for new subscriptions from a steadily disintegrating pool of nonmembers.
Regarding their pricing and these other homes that benefit from password sharing, Netflix claims that 100 million homes worldwide utilize password sharing to access its services. For years, it has permitted the practice, which serves as an effective discount for customers, but lost money for the company. However, they turned this into a bigger reason for their recent price increases, even integrating it into its price structure with membership tiers that allow for more devices to stream together. Netflix has just begun to charge members an extra $3 per month if they share their service with anyone outside their home.
It is unsure if Netflix will be able to recover from these losses, but the streamer’s global subscription base of 220 million suggests it should be good for the time being. Netflix hopes that these troubles are simply temporary and that the next great Netflix success will once again tempt customers to return in the future and begin paying for the privilege of watching its content again.
