Netflix has been running full speed ahead for the past decade and beyond. But after years of growth, it finally hit a speed bump. The world’s largest video streaming service suffered its first subscriber drop in a decade in Q1 2022.
A StockApps.com analysis indicates that the firm closed the quarter with 221.64 active subscribers. That figure showed a drop of 200,000 subscribers from Q4 2021. Netflix further predicted losing another 2 million members by Q2 2022.
Following the development, Netflix’s shares plummeted by 35%. That drop, in turn, shed some $50 billion off of the firm’s market cap, raising concerns that it’ll struggle to reverse the trend.
So what’s ailing Netflix?
StockApps’s Edith Reads attributes the results to Netflix hitting a plateau in innovation. She said, “While Netflix still dominates the streaming video space, it’s losing subscribers because it hasn’t come up with new ideas and ways to reach its audience.” She added, “It hasn’t been innovative enough to stay ahead of its competitors.”
Netflix also pinned the loss of subscribers to its price increases that saw it lose a significant number of its North American subscribers. Experts like CMC Markets analyst Michael Hewson concur. He holds that Netflix’s customers have limited funds and thus seek to cut back on their streaming budgets.
Again, the firm has blamed its woes on account sharing. It holds that the practice is rife, estimating it to affect almost half of its global customer base. Its continuance is denying it membership and, therefore, revenue. Consequently, Netflix has said that it is looking at ways of monetizing those account sharers.
A drop in subscriptions is a big blow to Netflix
This drop in subscriptions is bad news for Netflix, as subscriber growth is crucial to its business model. It has long touted its rapid growth as a prime selling point for investors and potential partners. But now that the growth spurt has ended, it may have to consider scaling back on its massive investments in this area.
Netflix began its life as a startup DVD-by-mail service and only entered the streaming business in 2007. Since then, it has been on a roll, winning new members in droves. The company has expanded into original programming, international markets, and new features like mobile content downloads for offline viewing.
For years, it has been the undisputed king of streaming video. And it’s easy to understand why. Its growing library of movies and shows, including original content, helped earn more than 200 million subscribers worldwide. But now, it has to contend with competitors encroaching on its turf.