Netflix reported a decline in subscribers for the first time in more than ten years. The company lost about 200,000 users in Q1 2022 compared to Q4 2021 and said the forecast is even bleaker for the second quarter.
Netflix revealed the loss of subscribers in its latest earnings call, saying that the suspension of its service in Russia was one of the contributing factors. Winding down of its Russian operation resulted in Netflix losing about 700,00o subscribers. However, even if it were to add those users, the total users would have only increased to 500,000, well below the company’s forecast of adding 2.5 million users in Q1 2022. Netflix says it could lose up to 2 million additional users in the second quarter.
“Our revenue growth has slowed considerably,” Netflix revealed in its letter to shareholders, “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 also blamed the slow rate of growth on password sharing. The company says over 100 million households are accessing Netflix via shared accounts, and as a result, the company is finding it “harder to grow membership in many markets.”
To tackle this, Netflix says it will implement “more effective monetization of multi-household sharing.” In fact, the company has already started charging extra for sharing your account with people who don’t live with you. Netflix is currently testing this in Chile, Costa Rica, and Peru.
As Netflix notes in its address to shareholders: “Another focus is how best to monetize sharing – the 100M+ households using another household’s account. This is a big opportunity as these households are already watching Netflix and enjoying our service.”
Netflix is also considering launching more affordable, ad-supported plans. During the earnings calls, Netflix co-founder and CEO Reed Hastings announced that the company is “quite open to offering even lower prices with advertising, as a consumer choice.”
Hastings further added, “Those who have followed Netflix know that I have been against the complexity of advertising and a big fan of the simplicity of subscription. But as much as I am a fan of that, I am 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.”
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