Netflix Loses Subscribers for First Time in More Than a Decade Amid Increased Costs, Competition

Netflix Loses Subscribers for First Time in More Than a Decade Amid Increased Costs, Competition
In this photo illustration a computer and a mobile phone screen display the Netflix logo in Arlington, Va., on March 31, 2020. (Olivier Douliery/AFP via Getty Images)
Katabella Roberts

Streaming giant Netflix has lost subscribers for the first time in more than 10 years, driven by factors such as increased competition, the ongoing conflict in Ukraine, and account sharing across non-paying households, the company announced on April 19.

The American subscription streaming service told investors that it lost 200,000 members globally in the first three months of the year, and warned that more losses are expected in the next three months to July.

Netflix had previously forecasted it would add 2.5 million paying customers but the company told investors that it expects to lose 2 million global subscribers in the current quarter.

The last time the company lost members in a quarter was October 2011.

"Our revenue growth has slowed considerably," Netflix said in a letter to shareholders on Thursday. "COVID clouded the picture by significantly increasing our growth in 2020, leading us to believe that most of our slowing growth in 2021 was due to the COVID pull forward."

Netflix said its decline in membership was due to a combination of factors including "macroeconomic weakness" and changes to its prices. Earlier this year, the streaming giant announced that it would be raising its U.S. monthly subscription prices by $1 to $2 per month depending on the plan.

A total of 600,000 people stopped its service in the United States and Canada due to the price change, Netflix said.

It also cited its large size, increased competition, and the war in Ukraine, noting that its decision to suspend its service in Russia in the wake of the Moscow-led invasion of Ukraine also cost it 700,000 subscribers.

It also pointed to account sharing across non-paying households, estimating that 100 million are sharing household accounts, including over 30 million in the United States and Canada.

Back in March, Netflix said it plans to implement a new feature that would prevent different households from sharing their account passwords by charging them additional fees, something it has been working on for the past year.

That feature, Netflix says, will allow members who share their Netflix passwords with someone outside of their household to do so "easily and securely, while also paying a bit more."

This will cost—at the lowest price—the equivalent of about $2 in each pilot country in which the program is being tested, which included Chile, Costa Rica, and Peru.

In its letter to investors on Tuesday, Netflix said it ended the quarter with roughly 222 million subscribers.

Going forward, the company said its plan is to "reaccelerate our viewing and revenue growth by continuing to improve all aspects of Netflix—in particular, the quality of our programming and recommendations, which is what our members value most."

"On the content side, we’re doubling down on story development and creative excellence," Netflix said in its earnings letter.

Meanwhile, Netflix co-founder and co-CEO Reed Hastings said on Tuesday’s earnings call that the company is open to looking into offering lower prices to customers with advertising, something that he was previously against.

"Those that have followed Netflix know that I’ve been against the complexity of advertising and a big fan of the simplicity of subscription," Hastings said, Variety reports.

"But as much as I’m a fan of that, I’m a bigger fan of consumer choice. And allowing consumers who would like to have a lower price and are advertising-tolerant get what they want, makes a lot of sense."

Following the announcement of subscription losses, Netflix’s stock price plunged by as much as 25 percent in after-hours trading.

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