News
Netflix loses almost one million subscribers in Q2
The Harmattan News reports that the company lost about 200,000 subscribers in the first quarter of 2022, the highest in over a decade.
Netflix believes that factors hampering its growth include the time it is taking for homes to get access to affordable broadband internet service and smart televisions, along with subscribers sharing their accounts with people not living in their homes.
The present numbers, however, faired better than earlier projections by the company itself, which predicted a loss of 2 million subscribers by Q2, earlier in the year.
In a Securities and Exchange Commission filing, Netflix expressed optimism and confidence in its ability to weather the storm, the NBC News reports.
“Reaccelerating our revenue growth is a big challenge,” the statement read, “But we’ve been through hard times before. We’ve built this company to be flexible and adaptable and this will be a great test for us.
“We’re confident and optimistic about the future.”
Despite the loss, the company forecasts that about one million new subscribers will join the service by the end of the third quarter.
In all, the company had roughly 220 million subscribers at the end of June – still well north of its closest competition.
But the company, long accustomed to posting double digit growth, is grappling with its most serious slowdown in years, with revenue in the April-June quarter of $7.9bn, up just 8.6% year-on-year.
The firm’s share price has dropped more than 60% so far this year, as investors sour on its prospects.
“Netflix’s subscriber loss was expected but it remains a sore point for a company that is wholly dependent on subscription revenue from consumers,” said Insider Intelligence analyst Ross Benes.
“Netflix is still the leader in video streaming but unless it finds more franchises that resonate widely, it will eventually struggle to stay ahead of competitors that are after its crown.”
Shares climbed more than 7% in after-hours trade on relief that the losses were not larger. The firm had warned it could lose as many as two million subscribers.
Netflix has said it will jumpstart growth with a new ads-supported service and by clamping down on password sharing – which one study estimated was costing Netflix $6bn a year.
It is already charging more for sharing accounts in some countries in central and South America. It hopes to replicate this model around the world.
However, the company has known about problems with passwords sharing for years, and has so far failed to find a solution.
In its shareholder update, the company said it was “encouraged by our early learnings and ability to convert consumers to paid sharing in Latin America”.
It said it expected its less expensive, ad-supported option to launch in early 2023, starting in “a handful of markets where advertising spend is significant”.
“Like most of our new initiatives, our intention is to roll it out, listen and learn, and iterate quickly to improve the offering,” the company said.
The ad service has the potential to attract both existing customers inclined to cancel over price hikes, as well as new households hesitant to commit to a subscription, Mr Bisson said.
It should be possible for Netflix to make the same amount of money – or more – per user than it did by relying on subscriptions, he added.
