People are Sharing Streaming Accounts. Is Netflix Losing Subscribers and Revenue?
Netflix is the world’s most popular video streaming service with thousands of shows, movies, and documentaries available on it. However, lately, the company is under a lot of pressure after it reported that it had lost around 200,000 subscribers in the first quarter of 2022 alone. The company also had to cancel the production of some original shows because of the budgetary constraints that come with this move. The stock price has also hit a 4-year low below $200, despite recording its all-time high of around $690 just months ago.
Now in a latest move, Netflix shareholders are suing the company in court for this disastrous result and subsequent reduction of its stock price. More on that later but why is Netflix suddenly losing so many of its subscribers?
There are many reasons why Netflix is losing its subscribers. Here are some of them:
Account Sharing Culture
Previously, even though Netflix allowed people to share their accounts in multiple devices, many users preferred to have their own accounts. There was no added benefit from having your own personal account only, but the subscription fees were quite minimal and not many people chose to do it.
But enter the Covid-19 pandemic; people had to remain confined to their homes for months and even for years in some cases. As a result, many resorted to binge-watching on Netflix and other streaming services. Netflix was the most popular among the lot. Therefore, it experienced a massive increase in the number of subscribers as users flooded to it during the depressing lockdown times.
This caused its stock price to suddenly start appreciating like crazy. The price shot from around $320 at the start of 2020 to as high as $690 in October 2021. This represents a massive 215% rise in the price of the stock.
The reason behind the immense rise of the Netflix shares was partly the stock market boom that was caused by a large amount of stimulus going around the economy. Now, as the effects of those economic bailout packages present themselves, inflation rates soared and stocks got back into bearish territory, effects can be witnessed around the globe.
The account-sharing culture has continued, and more and more people are getting to share their Netflix accounts to save some money or simply because the taboo around it has been broken. So, while the number of viewers is possibly rising, we are witnessing a decline in the number of subscribers and therefore, the company is facing smaller revenue.
Netflix had in many ways a monopoly over the streaming service industry with its competitors limited to a supporting role. However now, the advent of Disney+ and HBO Max has really shaken things up. They have also made big inroads with popular original series. Both seemed harmless at first but have started taking bites off the apple and that worries Netflix and its shareholders. Could this be the start of something a lot bigger that will eventually engulf Netflix itself? It remains to be seen but the early signs are there for sure.
Netflix will look to start inwards and focus on successful originals from now on to compete with the likes of HBO Max and a range of relative newcomers.
What’s Next for Netflix?
Netflix is still a big company and can come out of this with the right approach. With over 220 million subscriptions around the world, 200,000 odd decreases from the total tally may not seem much.
However, the recent lawsuit from the company’s shareholders has caused an unnecessary problem for the company. Many of these investors bought the Netflix shares in hopes of improving their wealth but the opposite is happening now. The company is yet to comment on the matter.
The lawsuit is not a very good omen for the company and the shareholders are straight-up demanding compensation for the recent losses in the stock prices. There is limited action the court can take on the matter, but the company may have to engage in some stock buybacks to quell the fears regarding the financial situation of the company.
The company is also considering an ad-based lower tier of subscription soon to attract more subscribers but that may cause further problems of their own. For now, the company is facing some trouble. It is still the king of the hill, but other forces want to bring it down, at least to proportional levels. Let’s see what becomes of the streaming sector in the near future.