There are grim days ahead for Netflix which has revealed in its latest quarterly earnings report [pdf] that subscribers continue to leave the platform.
Nearly one million subscribers – 970 000 to be exact – have left the service since Netflix announced its first quarter earnings earlier this year. Despite this, revenue for the last three months increased by 1.29 percent to $7.9 billion with net income amounting to $1.44 billion.
Netflix says that these figures are below its guidance forecast is due to how other currencies perform against the dollar. In the Europe, Middle East and Africa region, average revenue per member fell from $11.56 to $11.17 over three months. Ignoring the effect foreign exchange has on that pricing Netflix reports that average revenue per member in EMEA rose by six percent.
No more blaming outside factors
Over the course of the last year, Netflix has pointed to the pandemic, a sluggish economy and the war in Ukraine as reasons for slow revenue growth.
The firm says in its earnings report that, “We’ve now had more time to understand these issues, as well as how best to address them”.
How does the firm intend to do that?
“First and foremost, we need to continue to improve all aspects of Netflix. This focus on improving our core service has served us well over the past 25 years, and remains our north star to drive continuous growth. It’s why we strive for an ever better content, marketing and product experience. Also as a pure play streaming business, we’re unencumbered by legacy revenue streams. This freedom means we can offer big movies direct-to-Netflix, without the need for extended or exclusive theatrical windows, and let members binge watch TV if they want, without having to wait for a new episode to drop each week. This focus on choice and control for members influences all aspects of our strategy, creating what we believe to be a significant long term business advantage,” the firm wrote.
Shows such as The Umbrella Academy, Stranger Things and Squid Game generated positive conversation online. Stranger Things 4 Part 1 for instance outpaced conversation online for Obi-Wan Kenobi and Top Gun: Maverick. However, the graph Netflix shows off in its earnings report is incredibly linear except toward the end of the month just before Part 2 dropped. Obi-Wan Kenobi, however, benefits from weekly releases as it bumps the conversation up. Netflix also has more subscribers and is available in more markets than Disney+ so this isn’t comparing apples to apples.
We won’t deny that Netflix has some killer content but when that content is being filmed or cancelled, Netflix is really wanting for something to stoke conversation and by extension, viewership.
Netflix needs something to increase memberships and it has two immediate solutions although by immediate we mean in the coming months on an unclear timeline.
The first is that ad-supported subscription tier which Microsoft has joined Netflix on as its advertising partner. This solution is still months away and there’s no telling how it will be received.
The second solution is to ask members to pay to share their accounts. So far Netflix has tested paying for extra profiles and paying to add additional households to your subscription. We prefer the former as the latter has many problems just from first blush.
Truth be told, Netflix’s under performance over the last two quarters feels like a sign of things to come for streaming services. Internet denizens have bemoaned the fact that streaming now requires several subscriptions to independently operated platforms just to watch the few pieces of content they enjoy. The landscape is incredibly fragmented thanks to Netflix’s early success and the belief that if Sarandos and crew can do, anybody can.
While Netflix needs to save itself, we feel as if the entire content streaming ecosystem needs a rethink before we start reliving the heady days of rampant piracy.
[Image – Thibault Penin on Unsplash ]
