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Netflix Feeling the Pressure

By Asca Akiyama, FN alum '22

After years of unprecedented growth, Netflix is experiencing the highest number of subscription cancellations in company history.

In its second-quarter earnings report, Netflix revealed a loss of 970,000 subscribers during the three-month period from April to July. This number reaches a whopping 1.3 million when accounting for Canadian users as well. In the first quarter, Netflix announced a loss of 200,000 subscribers and projected a loss of 2 million subscribers in the second quarter. The success of the fourth season of “Stranger Things” buoyed results for Netflix, downscaling the damage by half. While the forecasted disaster was averted, it is the largest subscriber loss in company history. This quarter’s statement still comes as a devastating blow for Netflix, suggesting to many, the end of the company’s long reign as the leading streaming giant. Reed Hastings, the Chief Executive Officer of Netflix expressed his disappointment, stating, “it’s tough losing one million subscribers and calling it a success.”

As pre-pandemic activities like moviegoing return, Netflix is struggling to attract new subscribers and maintain loyal customers. Given the recent rise in costs of living, the hike in subscription pricing was a breaking point for many consumers, who chose to cut back on expensive streaming services. The company also faces unrelenting competition from companies like HBO Max, Amazon Prime, and Disney+. While Netflix remains well above its closest competitors, it is coming up against the biggest company slowdown in years. Analysts suspect that unless Netflix creates more franchises that speak to its broad audience, it will eventually fall behind its fast-moving contenders.

In an effort to restore its growth, Netflix plans to continue producing original content in-house to hold copyright ownership rights of movies and series. The future of Netflix depends on its ability to ensure quality content that resonates with mass audiences. Additionally, it is crucial for Netflix to continually generate buzzworthy entertainment.

In July, Netflix received 104 Emmy nominations to HBO’s 140. Looking into the third quarter, HBO has an impressive lineup prepared with the release of the “Game of Thrones” prequel and “House of the Dragon” in August. Amazon is also expected to garner considerable engagement with the release of “Lord of the Rings: The Rings of Power” in September. The pressure is on.

Netflix is also focused on restricting password sharing and building an ad-supported subscription tier, which, if executed well, could give the company a long-term business advantage by 2023. Richard Greenfield of LightShed Ventures is hopeful of Netflix’s new strategy, stating “Not only were losses not as bad, but expecting growth in Q3, even if it’s modest growth, is probably pretty encouraging to people… They’re basically saying that while everyone else in the industry is losing billions of dollars, not only are they making money in 2022 they’re going to make a lot of money in 2023 and beyond.”

Despite facing strong headwinds, Netflix is making significant strides toward rapidly recovering lost revenue and fostering further growth during these times of economic downturn. Time will tell if these strategies will work in Netflix’s favor.



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