Netflix experienced a subscriber drop of one million subscribers in its second quarter of 2022, but these losses may not really be that bad. The company is undoubtedly hugely successful, launching numerous original series like the global hits Stranger Things and Bridgerton, as well as churning out Oscar-winning movies such as Roma and Marriage Story. In the US and Canada alone, 75 million out of a total 142 million households have subscriptions to Netflix (via The Guardian).

Netflix rang in 2022 with approximately 222 million subscribers but lost 600,000 from the US and Canada alone after its January price hikes. Then in March of the same year, Netflix pulled its service out of Russia in support of Ukraine, losing another 700,000 subscribers. In April, the company reported overall losses of 200,000 subscriptions for the first quarter. These losses resulted in a sharp drop in share prices and 150 Netflix employees getting laid off to cut costs.

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In its second quarter, Netflix lost an additional 970,000 subscriptions, though this was better than the two million they had originally estimated (via IndieWire). This is likely due to the phenomenal success of May’s Stranger Things season 4 Volume 1 release. This season of the hit series generated 1.3 billion hours of streaming in its first month, breaking viewership records as Netflix’s biggest season of an English-speaking show ever. As a result, despite still being in the red, Netflix’s loss in subscribers might not really be that bad after all. The company still sustains over 220 million global subscribers and even predicts it will add another one million in the next quarter.

Why Netflix Is Losing Subscribers

Vanessa Hudgens in The Princess Switch 3

When the pandemic first hit in 2020, Netflix was at an all-time high as people stuck at home had few options for entertainment. Now that people are returning to in-person activities, however, Netflix is struggling to attract new sign-ups and maintain its current members, especially as the cost of living rises and people cut back on unnecessary expenses. This has led to Netflix losing subscribers, a shift furthered by its subscription cost increasing to $15.49 in the US compared to the $11 it cost in 2019. The price hikes Netflix has implemented are risky, especially since it is now more expensive than its major competitors Apple TV, Amazon Prime, and Disney+.

Furthermore, people often subscribe to multiple streaming services, but in cutting back, they stick with whichever companies offer their favorite content. An example of this is Disney+, which offers exclusive franchise content like Star Wars and Marvel, which resonates with a broad audience - and users are often also highly loyal to this type of content. Additionally, with content like Netflix’s Christmas movie Princess Switch 3 streaming on Hulu and Amazon Prime Video, some of the service’s original content is cannibalizing its own appeal via other platforms. Companies like HBO and Paramount have even launched their own streaming services, removing their content from Netflix accordingly.

Netflix has also recently been criticized by subscribers for focusing more on the quantity, not the quality of its new streaming content. Whether justified or not, Netflix has developed a reputation in recent years for debuting shows to draw in subscribers but then canceling the series after a few seasons. And while most people stick around for premium content, such as its huge hits like Stranger Things and Bridgerton, these are not always enough for users to justify staying with the service.

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Is Netflix's Subscriber Loss That Bad?

Netflix subscriber loss just the beginning

Netflix still boasts 220 million subscribers, many more than its competitors Amazon Prime Video and Disney+, with 200 million and 130 million subscribers, respectively (via IndieWire). Additionally, new subscribers still join the platform, usually from demographics with different tastes than existing subscribers. This allows Netflix to showcase existing content to a new audience but also present new material to a broader audience going forward. The company is also expecting to add another million subscribers in its third quarter, indicating their losses are plateauing. This leaves an opening to continue to slow their decline and implement crucial changes needed to bounce back.

How Netflix Is Trying To Stop Its Subscriber Loss

Stranger-Things-Season-4-Cast

Netflix has a few ideas for preventing the inevitable loss of more subscribers and encouraging new sign-ups. The first is to reduce password sharing, which, at present, allows an estimated 100 million households to stream their content for free (via CNN Business). The company hopes to roll out a user-friendly offering where users can pay to add extra profiles to their accounts for users outside their household. Presently, they are already charging $2-$3 more for additional accounts in Chile, Costa Rica, and Peru. This idea may work in theory, but it is hard to reinforce, and the company has so far failed to prevent password sharing.

Netflix also hopes to stop its subscriber loss by offering users a lower-priced subscription as soon as 2023. This subscription would involve Netflix adding advertisements to its content, targeted and tailored to each subscriber. Netflix will partner with Microsoft to develop this new ad tier (via CNN Business). While lower prices may lure new and old users to the platform alike, Netflix could be charged premiums by studios whose content would now have advertisements. Additionally, some studios may object to advertising in their content, meaning the lower-cost subscription would exclude certain series and movies. The specific pricing for the upcoming advertisement-focused tier is unknown at this time.

Another significant way Netflix hopes to retain and earn new subscribers is by creating franchise-like brands similar to its competitors and focusing on more high-profile releases. The company hopes to turn its bigger shows and movies into larger universes where they can not only expand on content but also sell marketable products, such as the Hellfire Club merchandise popularized by Stranger Things season 4. This past season of Stranger Things also teased future spinoffs, much like Money Heist’s own Korean spin-off that was released earlier this year after the mega success of Korean drama Squid Game, Netflix’s most-watched show. In addition, Netflix is turning some of its movies into franchises, including Enola Holmes, Knives Out, and Extraction, which are all set to see sequels.

Related: Stranger Things Season 4 May Have Already Teased Its Spinoffs

Netflix are using a few other methods to retain subscribers, too, including splitting content – such as breaking Stranger Things season 4 into two volumes – as a clever way to retain subscribers over multiple quarters. Stranger Things Volume 2 also broke streaming rules with its two movie-length episodes, showing the service is also trying to focus on quality content itself rather than the formulaic structure it usually follows with its binge-worthy series. Netflix is also focusing on major book adaptations like spy thriller “The Gray Man” and Japanese manga “One Piece.” The company has even hired in-house book scouts to find quality works to adapt, rather than having outside agents or publishers pitch their own material.

What Netflix's Subscriber Loss Means For Other Streaming Services

Split images of all the streaming service logos and movies

Streaming services like Disney+ have the considerable advantage of franchise-dedicated users, like those who enjoy Star Wars and Marvel. While Netflix is a streamer without much to fall back on besides subscriptions, other companies like Amazon also have other businesses and revenue streams to rely on. Furthermore, as subscribers leave Netflix, they will likely be looking for cheaper (or better) alternatives, leaving the door open for other streaming services to reel them in. Disney+ has broken its own viewership records, partly thanks to the 8 million new subscribers it gained in the second quarter (via The Wall Street Journal). There is a possibility some services may merge, offering service bundles to offset costs for users who regularly use multiple platforms. Contrastingly, services could also start to offer content that can be paid for separately from a subscription, allowing people to pay specifically for what they want to watch.

With Netflix leading streaming services for so long, it seemed inevitable the company would see losses of some sort - as there’s only one way to go from the top. However, Netflix’s loss of subscribers really isn’t that bad, as this sudden wake-up call gave the company the push it needed to come up with fresh approaches to its subscriptions and content. Despite its losses, Netflix continues to maintain a higher number of subscribers than its competition. Only time will tell if Netflix can bounce back in its third quarter of 2022.

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