The major streaming service provider, Netflix, recorded a loss of 200,000 subscribers compared to its previous quarter, as mentioned in a report, and will need to go after shared accounts in order to find room for growth.
The report points out that one of the main reasons for the major dip in subscribers was the fact that the service was no longer provided to those who live in Russia due to the ongoing war with Ukraine. That alone cost Netflix around 700,000 subs, while in other places around the globe it actually added a further 500,000 people to its userbase, which is what helped leverage the company’s losses in the previous quarter at the 200,000 user mark.
Yet this still fell far from what Netflix had forecast for this period of the financial year, which was to add a further 2,5 million subscribers to their tally.
And the streaming provider’s predictions for the rest of year seem equally as bleak, if not more so, with a loss of over two million subscribers set for the next quarter. Considering how at the same period of time last year, Netflix had recorded an addition of 1,5 million people to its userbase, its hard not to notice how things have turned around.
The report came with a letter towards the shareholders that outlined the decline in revenues despite the fact that Netflix, as a service, remains as popular as ever. As the letter goes on to say, the main reason behind this is the fact that users continue to share passwords to their accounts.
“However, our relatively high household penetration – when including the large number of households sharing accounts – combined with competition, is creating revenue growth headwinds,” the letter reads. “The big COVID boost to streaming obscured the picture until recently. While we work to reaccelerate our revenue growth – through improvements to our service and more effective monetization of multi-household sharing – we’ll be holding our operating margin at around 20%.”
The report goes on to stress that there are about 100 million people who are using accounts that don’t belong to them but also outlines some of the methods by which it plans to stop them.
“Early last year we started testing different approaches to monetize sharing and, in March, introduced two new paid sharing features, where current members have the choice to pay for additional households, in three markets in Latin America,” the letter continues. “There’s a broad range of engagement when it comes to sharing households from high to occasional viewing. So while we won’t be able to monetize all of it right now, we believe it’s a large short- to mid-term opportunity.”
With this move, Netflix predicts that it will resume its 10 percent year-on-year growth in revenue, as it will find an entirely new userbase to expand on.
As a result of this news, the company’s market share had a noticeable decline as it dropped to more than 20 percent of its initial value after today’s US stock exchange.
