Netflix worries subscribers who share passwords. It worsens his results

Strong pressure from competition, rising prices in some countries, leaving the Russian market and sharing passwords among users. These are some basic reasons why a streaming service Netflix subscribers have dropped significantly. From January to the end of March this year, it lost 200,000 of them. The last time it saw a drop in subscribers was in October 2011. The company has enjoyed continuous quarterly growth over the past decade.

At the presentation of financial results, Netflix warned shareholders that another two million subscribers are likely to leave by July. “Our revenue growth has slowed significantly,” the company said. However, it is still the largest streaming service in the world and the number of subscribers is over 221 million.

Shares of Netflix responded to the published results with a drop of more than 25%. The company’s market value has fallen by more than $ 30 billion. “Some factors influencing our growth will not be directly affected, such as the price of a fast internet connection for households or how they buy smart TVs. “Most of the views of our content come from TVs,” Netflix recalled.

The company reported a profit of $ 1.6 billion in the first three months of this year, with total revenues of $ 7.87 billion.

Black sharing

Paradoxically, Netflix pays for its popularity. The company says that in addition to subscribers, another 100 million households sign up illegally because someone shares access data with them. He wants to prevent this sharing in the future, as he loses sales. It probably has around 30 million “gray” users in the United States and Canada alone.

“This is a great opportunity for us because these households already know Netflix, monitor and enjoy our services. Sharing has probably helped boost our growth. We’ve always tried to make sharing in a subscriber’s home easy, such as profiles or multi-device streaming. Although these features are popular, they have also caused confusion as to when and how Netflix can be shared with other households, ”the company acknowledges in a letter to shareholders.

CEO Reed Hastings he noted that while he understood the “legitimate” sharing of passwords within the family, it made it difficult to get new subscribers in some states. “As long as we were growing fast, we were not prioritizing account sharing. But now we are working hard on it, “he said.

Password sharing measures are currently being tested in Chile, Costa Rica and Peru. Customers can add access to up to two additional accounts to their monthly flat rate, paying about two to three dollars each.

Calculating potential returns is not easy. Among the black passengers are people who use the shared access data only occasionally, but also frequent users who look at virtually everything. “We probably won’t be able to monetize them all immediately, but we believe this is a great opportunity in the short to medium term,” the company said.

Will there be an ad version?

Netflix decided to leave the Russian market in March due to Putin’s aggression against Ukraine. He has now announced that 700,000 users have been lost as a result of this move. Another 600,000 people canceled their subscriptions after the January price increase in the USA and Canada. The basic monthly flat rate then increased from nine dollars to ten, the standard flat rate rose from 14 to 15.5 dollars per month. The service also became more expensive in Great Britain.

These losses were partially offset in Asia, especially in the Japanese, Indian and Philippine markets.

The director admitted that Netflix is ​​considering a cheaper tariff supported by advertising, which was previously unimaginable for this company. “For a long time, I refused to embark on complications with advertising. Although I’m a fan of a simple subscription model, I’m an even bigger fan of consumer choice, “Hastings said in a teleconference call with investors.

Households around the world are facing increased living costs, so they are looking for where to save. And streaming services are one of the most necessary items – especially when one family has more than one subscription. A cheaper advertising tariff could appeal to less demanding users.

“The key to our success has been our ability to create amazing entertainment around the world, offer it in a highly personalized way and gain more viewers than our competitors. These are the main strengths and competitive advantages of Netflix, “the company wrote in the letter to shareholders.

“Although hundreds of millions of households already subscribe to Netflix, it still has huge growth potential because more than half of the world’s broadband households do not yet pay for it,” the letter continues. “In the long run, we will grow thanks to customers outside the United States,” the company expects.

After all, three of the six most popular shows were not shot in English, and yet they became worldwide hits. These are the South Korean series Squid Game and All of Us Are Dead and the Spanish series Paper House. Netflix currently produces new movies and TV shows in 50 states.

Analysts point out that digital subscription, as Netflix’s only business model, is its weak point. The revenues of its competitors also come from other areas. Disney, for example, operates theme parks and also has sales from classic movie theaters. Other companies operate television stations.

Netflix has admitted that it is also considering new revenue streams, such as from mobile gaming. From May, the application inspired by the card game, which is sold on the Czech market under the name Exploding Kittens, will be available for download. The mobile version already exists today, but there will be bonus cards in the form of Netflix. In addition, the streaming service is preparing an animated series for adults with the same theme.

The streaming giant hopes to keep the subscribers thanks to the upcoming shows. Specifically, it relies on another series of the Stranger Things phenomenon, the final episodes of the Ozark series, the sequel to the film detective film The Knives, or the thriller The Gray Man, which was partly shot in Prague. At the time of the filming, it was the film with the largest budget at Netflix to date, talked about $ 200 million.