Netflix has always been a family favourite. For years it’s spoilt us with films for the family, children’s TV shows, award winning horror films and, of course, the specially recommended for you section, to make you feel as if Netflix really knows you.

 

Over the years, Netflix’s growth in popularity has seemed to be never ending. By the end of 2021, it had a whopping 222 million subscribers, making it the world’s biggest streaming service. It seemed as though there was no limit to Netflix’s power. It was firmly established as one of the so called FANG stocks. Investors were handsomely rewarded for backing Netflix and the stock appeared to only ever go up, until now. During the first quarter of this year, Netflix managed to lose over 200,000 subscribers in the USA alone. A drop like this has never been seen in the last 10 years of the company’s records and it shocked investors who had expected growing subscriber numbers. People were baffled as to how such a reliable business had managed to lose that many customers in such a short period of time, and it seemed that even the bosses at Netflix couldn’t explain properly. Was this the beginning of the end of its growth?

 

There were many things that were blamed by Netflix as the cause of the drop in subscriptions, as random as the ongoing war in Ukraine (and the banning of Netflix in Russia) to their new policy on not sharing passwords. But critics are suggesting that other reasons could be behind the drop in Netflix’s profits. One of the more popular theories is that with all the competition from other streaming platforms such as Amazon Prime or Disney+, Netflix just isn’t able to retain such a large market share. With the ‘on demand’ streaming market growing, it's become impossible to have all the most sought-after programmes and maintain absolute customer satisfaction. Different companies are absorbing different target markets, such as Disney+ now almost taking over in popularity for the parents of young children, who won’t be able to find any Disney movies on other streaming platforms (after the vast majority of them were removed in 2020). Of course, Netflix still has some of my favourite TV shows available on it and I think it will remain very popular, but the impact of missing out on providing fan-favourite films (like Avengers: Infinity War, which is available on Disney+) is undeniable and will certainly leave a huge gap in Netflix’s market.

 

One of Netflix’s main scapegoats for their drop in revenue is their new proposition for the adding of fees to shared accounts. Many families or friends who don’t live together share a Netflix account and have multiple profiles to watch their TV on, but Netflix has implied that it is costing the company too much and that they would have to start charging extra on shared accounts to make up for lost potential subscriptions. The company has already launched a test of this feature in Peru, Costa Rica and Chile, where account holders who are sharing their passwords are asked to pay around $2 extra to allow for extra profiles to be set up from different addresses. When asked about the reason behind the new policy, Netflix’s Chief Operating Officer Greg Peters said that ‘We’re not trying to shut down sharing but we’re going to ask you to pay a bit more… so we also get the revenue associated with the viewing.’

 

Another theory behind the sudden drop of Netflix subscribers is the impact of the cost of living crisis. With household utility costs drastically rising, it’s become vital for many families to reduce expenditure on discretionary items to maintain their standard of living – for many streaming services will be the first to go.  Whether it be Netflix or any of their competitors, these services just aren’t considered as vital to a family’s lifestyle, compared to paying their heating bills. The Netflix subscription model has been applied to many services as companies seek the regularity of ongoing income over one off payments whether it is streaming services or digital newspaper subscriptions.  Will the cost of living crisis represent the end of growth to this model?