For the first time in their 10 years of streaming service, Netflix has recorded a loss of subscribers - 200, 000 in Q1 of this year.

Had they not cut services in Russia over their invasion of Ukraine, Netflix would have added 500, 000 subscribers. This still would have fallen far short of their forecast 2.5 million increase.

Have they peaked?

Possibly.

They cite four reasons for the loss and first essentially boils down to there's only so many potential consumers in the market.

First, it’s increasingly clear that the pace of growth into our underlying addressable market (broadband homes) is partly dependent on factors we don’t directly control, like the uptake of connected TVs (since the majority of our viewing is on TVs), the adoption of on-demand entertainment, and data costs.

Interestingly they also detail that approximately one third of their users don't pay - they're password sharing. So it seems like they haven't completely solved the entertainment industry's piracy problem.

Second, in addition to our 222m paying households, we estimate that Netflix is being shared with over 100m additional households, including over 30m in the UCAN region.

That's one third of their users.

Plus competition and Ukraine.

Third, competition for viewing with linear TV as well as YouTube, Amazon, and Hulu has been robust for the last 15 years. However, over the last three years, as traditional entertainment companies realized streaming is the future, many new streaming services have also launched.

Fourth, macro factors, including sluggish economic growth, increasing inflation, geopolitical events such as Russia’s invasion of Ukraine, and some continued disruption from COVID are likely having an impact as well.

In an effort to address the password sharing problem, Netflix are now considering a lower subscription cost ad-supported option.

Also potentially of interest, Netflix co-CEO Ted Sarandos highlighted games.

We’ve got to compete, and we’ve got to continue to improve on the core service which is making TV series and films and now games that people really love.

This isn't new. Netflix indicated last year that they were going to get into games and in November released some for mobile devices.

After having redefined the television and film landscapes, it will be fascinating to see what they do and how they fare in gaming.

[ Main Image: Netflix logo. Credit: Netflix. ]

References

Maas, Jennifer (April 19, 2022). Netflix Loses 200,000 Subscribers in Q1, Predicts Loss of 2 Million More in Q2. Variety.

Peters, Jay (July 20, 2021). Netflix’s gaming expansion starts with mobile. The Verge.

Spangler, Todd (Aril 19, 2022). Netflix Will Launch Lower-Cost, Ad-Supported Streaming Plans, Reed Hastings Says. Variety.

Verdu, Mike (March 11, 2021). Let the Games Begin: A New Way to Experience Entertainment on Mobile. Netflix.