Why is the streaming platform losing subscribers? How is it trying to generate more revenue?
Why is the streaming platform losing subscribers? How is it trying to generate more revenue?
the story So Far: Streaming platform Netflix lost two lakh subscribers in the first quarter of its fiscal year and is expected to lose another two million subscribers in the second quarter. It attributed issues related to geopolitical tensions, increased competition and domestic penetration in Ukraine to the consumption of content from one account in one household and sharing outside the household. the day it communicated the quarterly results, Reuters reported that Netflix’s stock fell 26%. In addition, it wiped out nearly $40 billion of its stock market value.
Why is there a drop in paid subscriptions?
Netflix said its percentage of paid subscriptions hasn’t changed much over the years.
This is due to the complex dimension of sharing and ‘freeloading’. Netflix sharing is complicated. If a family of four watches OTT content on a connected TV (any device that enables streaming of content to a television) with a standard subscription that allows two profiles, it is classified as ‘sharing’. Difficult to do. An advanced package, which allows for more devices and profiles, may seem unnecessary in such a situation. This results in less monetization.
In addition to connected TVs, Netflix noted factors they “do not directly control” such as adoption of on-demand entertainment and data costs. The streaming platform estimates that Netflix is being shared with more than 100 million additional households, in addition to 222 million paying households. While sharing an account within the home is reasonable, Netflix aspires to monetize the additional sharing with people, outside the home.
Earlier in March, Netflix tested features in Chile, Costa Rice and Peru to achieve its monetization ambitions. ‘Standard’ and ‘Premium’ customers were allowed to add sub-accounts of up to two people with different profiles, personalized recommendations, logins and passwords for an additional payment. It was priced at 2,380 clp (₹218) in Chile, $2.99 (₹229.3) in Costa Rica and 7.9 pens (₹162) in Peru. On the global implementation of the program, Netflix said, “Therefore, while we may not be able to monetize it right now, we believe this is a huge short-to-mid-term opportunity.”
How has the Russo-Ukraine War affected membership?
Netflix lost 700,000 paid subscribers after the suspension of its services in Russia. OTT suspended its services in Russia after the country’s invasion of Ukraine. In March, Mr. Newman, at the Morgan Stanley Technology, Media and Telecommunications Conference , said The decision was taken amidst increasing restrictions and challenges with payment issues given the complex operating environment.
Central and Eastern Europe – the regions closest to Russia experienced a slowdown in its business. Netflix’s chief financial officer (CFO) said in a conference call that Russia’s invasion of Ukraine had some “spill-over effects” in other parts of EMEA (Europe, the Middle East and Africa).
“… apparently the war in Ukraine had a direct impact as Netflix shut down services in Russia and saw ripple effects not only in Ukraine but across much of Eastern Europe as the geopolitical landscape has created tension And entertainment is likely to move away from news information,” ratings agency Moody’s said in its assessment.
How is Netflix trying to increase revenue?
Netflix has raised its subscription prices in the US and Canada by between $1 and $2. “UCAN (US & Canada) net paid out -0.6 million, largely the result of our price changes that are in line with our expectations and significantly revenue positive,” it said in its quarterly results. In contrast, Netflix had cut prices in India after Christmas.
It reported good progress in “APAC (Asia Pacific)” countries including India, along with Japan, the Philippines, Thailand and Taiwan.
Summary
Netflix lost two lakh subscribers in the first quarter of its fiscal year. It attributed the damage to geopolitical tensions in Ukraine, increasing competition and issues related to account sharing and ‘freeloading’.
The streaming platform estimates that Netflix is being shared with more than 100 million additional households, in addition to 222 million paying households. It aspires to monetize all these additional homes.
In each market, Netflix strives to ensure that the product mix includes the subscription price and willingness and ability to pay. This is the reason why membership prices fluctuate at the regional level.
Subscription revenue is important for Netflix to reinvest in quality content.
This was the reason given for increasing prices in the US. In each market, it strives to ensure that the product mix includes the willingness and ability to pay while complying with subscription prices and related market conditions.
So, for some markets, Netflix has focused on localizing the content and not limited to just English content. This system provides customers with movies and web series that are global in nature such as squid game, La Casa de Papel (Money Histo)) And lupine, among others.
Will Netflix include ads in its subscription plan?
Netflix’s chairman and president Reed Hastings mentioned potentially launching a low-end plan with a layer of advertising. “We are trying to figure that out over the next year or two. But think of us as we are open enough to offer a lower price with advertising as a consumer choice,” he told investors. The advertising system is deployed by its peer Disney+, Walt Disney CFO Christine McCarthy previously said at Morgan Stanley The conference that Disney+ has been in demand since its launch has been an incredible advertiser. Operated as Disney+Hotstar in India, its ‘Super’ and ‘Premium’ plans differ in that they are ad-free, allowing viewing on two additional devices and adding video quality.
Netflix does not live stream sports unlike its competitors. Hence, it will likely have to add advertising options between its web series or movies or at terminal points. Ad-free content is one of the many reasons people choose to watch subscription-based content. At the same time a gamble has put forth mixed opinions. Moody’s expects the advertising option to help the company expand into heavily populated lower socio-economic areas and reduce churn from an economically challenging climate. Unrelatedly, it has been said that the customer base will continue to grow at a much slower pace than in recent years. It anticipates growth in the back half of the year which is usually its strongest.