Netflix has been struggling to sustain itself for some time, but this marks the first time in ten years they report a loss of subscribers. It’s quite a blow for what was once the one and only streaming service on the market, but these reports are not unexpected. In fact, they’ve been a long time coming.

This report was shortly followed by 150 employees being laid off, mostly from the US. Netflix stock has since dropped by over 30%, hovering at around $190 at the time of writing.

The loss of subscribers was reported at around 200,000 – this might seem inconsequential considering that Netflix has over 220 million subscribers, but this is the first time in ten years Netflix reports a substantial loss, and they expect to lose up to 2 million more still in this quarter.

While this doesn’t mean that Netflix is in immediate danger, it was enough to cause the aforementioned layoffs, as well as new plans regarding their marketing efforts and subscription plans, which are clearly reactions to this event.

For one, they’re considering the option of adding a cheaper subscription tier supported by ads. It would be a first for Netflix, which has so far run without any ads for other services.

Source: National Interest
Source: National Interest

Amazon Prime notoriously only offers a single subscription tier that shows ads before movies/episodes, as well as products from other partnered streaming services.

This isn’t typically a point of contempt for many people, given how Prime Video is simply a part of a cheap Amazon Prime subscription that includes a number of other benefits and services, like Twitch Prime and Prime Delivery.

However, for Netflix, most users are seeing this move as taking a huge step back. Obviously, from a business perspective, the price increases that happen over time are within reason, especially given how many original productions Netflix puts out on the regular (their quality notwithstanding).

But from a consumer perspective, most users are put off by the idea of downgrading their subscription tier to a worse version of the same service they had 2 years ago… for the same price.

It’s important to note that the ad-supported subscription tier is only in a testing phase at the moment and has not been officially rolled out. Netflix may still avoid this route depending on further study and general reactions to the idea.

Source: Daily News
Source: Daily News

There are a few recent developments that can explain the loss of subscribers and general lack of interest in Netflix:

  • They have outlined efforts to prevent password-sharing, which they partly blame for the stagnation of their subscriber base.
  • The price of the base subscription has increased several times, including recently in January 2022.
  • Netflix has lost a considerable catalog of shows and movies after the studios that made them pull the products so they could host them on their own streaming platform.
  • The catalog of non-originals is very lackluster now that Paramount, Warner Bros., and Disney all have their own competing platforms – keep in mind that Disney alone owns Marvel, Pixar, 20th Century Fox, and LucasFilm.
  • Netflix Originals are no longer pulling the audience needed to sustain the cost of making them, with many beloved shows being unceremoniously canceled, or new entries being so poorly marketed many don’t even know they were released.
  • Other streaming platforms like HBO and Disney+ are “stealing” the Netflix crowd with more attractive offerings that get a lot of media traction.

Another reason that has become more apparent as other streaming services got more attention is the fact that Netflix was still, for the most part, releasing entire seasons of their shows in one day.

While this was largely commended by its users, it leads to an instant loss of interest in new shows. HBO, Disney+, and Paramount have recently enjoyed a lot of success by releasing episodes on a weekly basis – retaining users and provoking discussion online.

Netflix may have to adopt the same model, especially after their original shows such as The Witcher and Russian Doll both got a second season release that went completely silent on social media talk.

They do have an ace in their sleeve in the form of Neil Gaiman’s long-awaited Sandman TV show, scheduled to release some time this year. It should bring the numbers up for a while, but if they will remain that way will depend on further and perhaps more systemic changes to Netflix's business model.

After all, back in 2014, Netflix was the only big shot in town. Now, the competition is fierce.