For the first time in over a decade, Netflix reported a loss of subscribers. In their first quarter, the streaming platform lost two lakh subscribers with another expected loss of 20 lakh in the second quarter, according to The Business Insider.
This has chiefly been blamed on growing competition and an end to the global pandemic. With events and outdoor activity normalising, consumers are less inclined to hold on to their subscriptions.
The Ukraine and Russia war did not help their case either. Pulling out all their services from Russia meant they had a massive loss of subscribers.
Until now, Netflix had been generous with letting customers share accounts with their friends and family. However, at a time like this, Netflix has decided to introduce restrictions on password-sharing and justified the decision citing the growing competition with alternative streaming services.
When Netflix first entered the market, it had the massive advantage of being the first mover. And they had been enjoying steady growth thanks to their somewhat monopolistic control over the streaming market.
However, competition is at an all-time high now. Their biggest competitors are backed by massive investments and possess various competitive advantages.
Disney +, Amazon Prime, Apple TV, and even HBO max are all supported by the management to bring in original shows and exclusive contents.
In many ways, Netflix's case looks like the once mobile giant Nokia. The Nokia of today is a mere shadow of its glorious days in the early to mid- 2000s.
During those times, mobile phones were almost synonymous with Nokia.
Consumers, tech enthusiasts, or even market experts did not expect the reign of Nokia to come crashing down. Although Nokia is still operational in a somewhat limited capacity, it has undeniably become a dwindled force – a smaller, less profitable company with fewer resources at its command.
Maintaining a 14-year lead in the mobile industry was undoubtedly impressive, yet things did not play out as they hoped. Nokia's glory began to dwindle when it overestimated its brand value and was not keen on innovating its operating system. The company constantly overlooked technical advancements, believing that consumers would stick to them till the end.
Similarly, Netflix kept expanding, and its subscriptions soared at the height of the pandemic. Netflix saw a steady influx of new subscribers and at one point, was confident enough to proactively delete inactive accounts.
As Netflix began to lose subscribers after the pandemic, they had to increase subscription prices. In a time of economic uncertainty, that was the last thing anyone wanted to see. While rising prices are a business reality, this trait is steadily infuriating even the most loyal subscribers.
As account-sharing is a longstanding process, Netflix can implement this strategy again for their customers to enjoy unlimited streaming from one account without paying for each individual's subscription. This policy might help Netflix compete for customer attention.
A competitive disadvantage is visible from the business model of Netflix since each of its subscription tiers includes the same library of shows. Many rival streaming services have brought free and lower-tier subscription plans where viewers are required to watch ads in exchange for paying less or getting access to limited content.
Considering the tolerance for commercials, Netflix could develop a similarly reasonable tier to balance between subscriber retention and raising its revenue.
This strategy might open the door for the advertisement-tolerant customers who prefer a lower price to get what they want. Additionally, Netflix could launch a cheaper pricing strategy for mobile-only users who treat their smartphones as their first screen.
Customers are switching to other competitors because they focus on producing high-quality content and blockbuster releases. The significant problem is that
TV studios and large film companies have taken back a lot of shows that used to run on Netflix and put them on their own streaming services.
For example, Marvel's hit shows such as Daredevil, Luke Cage, Jessica Jones, etc which once used to be top-rated shows on Netflix are now available only on Disney + exclusively. Hence, Netflix has tons of valuable content that has disappeared, making its library seem deserted.
If Netflix can concentrate on finding more exciting original projects for its consumers such as their hit show Strangers Things, it may overcome the issue and continue attracting new customers.
Md. Asif Hossain is a Lecturer of Entrepreneurship and Strategy at North South University. He is also a researcher, trainer, and management consultant.
Rehnuma Shahrin Shoronika is an undergraduate student at North South University.
Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinions and views of The Business Standard.