Why is Netflix struggling?

The streaming service lost 700,000 subscribers when it, like dozens of corporations, pulled out of Russia after the Ukraine invasion. But that drop-off is coinciding with broader viewership declines as pandemic-era restrictions recede and consumers increasingly seek out other entertainment options. As a result, Netflix is bracing for another 2 million accounts to fall away this quarter. At the onset of the pandemic , Netflix gained 16 million subscribers in the quarter ending in March 2020 and another 10 million in the April-to-June period. But growth has slowed as coronavirus restrictions have lifted around the country and people have sought entertainment outside their homes. “Our revenue growth has slowed considerably,” Netflix acknowledged in the first line of its letter to shareholders . The massive streaming boost from the pandemic that sent its stock soaring above $425 “obscured the picture until recently.” The other issue is cash burn. Netflix outspends all its competitors when it comes to content creation: The $17 billion it sets aside each year includes $5 billion for movies, some of which have garnered critical acclaim, such as “The Power of the Dog,” whose director Jane Campion took home an Oscar. But the rate of investment has failed to generate equal growth, according to analysts at LightShed Partners. “Netflix’s content, especially its English-language content, is simply not resonating relative to the level of spend,” the analysts said Wednesday in comments emailed to The Post. “The need for “better” content has become far more important as the level of competition has surged in the past two years. Having a volume of “good enough” content is no longer enough.”

What does this all mean for consumers?

Netflix might crack down on password sharing, including making people pay more to use the same account across different households. In March, Netflix began trials in Chile, Peru and Costa Rica that allow members to pay about $3 to add sub accounts for users who don’t live with them. It also is allowing users in those countries to enable others who share their accounts to transfer profiles and viewing history “Given we’ve just rolled out the features test in three countries, we first want to see how these features go, which will inform us how we continue to monetize account sharing moving forward elsewhere,” Kumiko Hidaka, director of communications for Netflix, told The Post in an email. Restricting people from sharing passwords could force some to pay for their own accounts — but it also might drive others to simply give up on Netflix and turn to any of the myriad streaming options. Greg Peters, Netflix’s chief operating officer, said that the company’s job is to “better translate” the value of nonpaying consumers into revenue while respecting households’ desires for flexibility. “If you’ve got a sister, let’s say, that’s living in a different city, you want to share Netflix with her, that’s great,” Peters said during an earnings call with reporters. “We’re not trying to shut down that sharing, but we’re going to ask you to pay a bit more to be able to share with her and so that she gets the benefit and the value of the service, but we also get the revenue associated with that viewing.” Neil Begley, a senior vice president with Moody’s, said that if Netflix can make money from about half of the 100 million households that aren’t paying to use its services, it stands to make as much as $1.8 billion. He didn’t think the policy shift would cost Netflix any business, only help with its cash flow. “If somebody has been borrowing someone’s password pretty actively, it’s hard to say that they should be angry now at what the company’s doing. It’s never been a free service,” Begley told The Post. “I don’t think people will begrudge the company doing this now, particularly when they see the stats.”

What kind of competition is Netflix facing?

The days of Netflix being the end-all, be-all of online streaming is over. The company faces steep competition from Hulu, Disney Plus, HBO Max, Amazon Prime Video, Paramount Plus, Peacock and on and on. The market is so crowded that some upstart streaming services are shutting down before they’ve even really stood up — even those backed by deep pockets. CNN’s digital news streaming service CNN Plus is calling it quits just a month after its launch after it failed to attract enough subscribers fast enough. And the much-hyped mobile streaming service Quibi famously shut down months after its launch, despite about $1.5 billion in investment. The packed playing field means the remaining streaming services have to work to attract viewers with an ever-rotating list of original shows, beloved movies and interactive content.

Are prices increasing again?

Not in the near future, Hidaka told The Post, given that the company raised prices in January. Instead, Netflix is trying to increase its price spread by offering lower-cost plans with some ads, chief executive Reed Hastings said earlier this week during call with reporters. “Those who have followed Netflix know that I’ve been against the complexity of advertising and a big fan of the simplicity of subscription. But as much as I’m a fan of that, I’m a bigger fan of consumer choice,” Hastings said. “And allowing consumers who would like to have a lower price and are advertising-tolerant get what they want makes a lot of sense.” The move will help Netflix expand into markets where customers might be on a tighter budget, Begley told The Post. It also reflects Netflix’s need to be flexible as it seeks ways to make money off its content, without the options of rivals like Disney and Paramount, which can monetize their stuff through theme park and merchandise revenue. “They will have to be more imaginative to grow from here,” Begley told The Post, noting that Netflix already claims nearly 300 of the roughly 800 million paying TV households around the world.

How does Netflix define a “household”?

People who live together qualify as a household, Hidaka said, whether that means a two-generation family of parents and children, roommates or couples. “Flexibility is important, and we want to ensure that members can easily use Netflix while traveling or if they live between two homes,” Hidaka told The Post in an email. The standard $15.49 a month plan (which was raised from $13.99 in January) comes with five user profiles and allows two simultaneous streams. The basic $9.99 package allows one active stream per account, while the premium $19.99 plan allows as many as four.

Business

Netflix is poised to crack down on account sharing. What happens now?

The company estimates that 100 million households access the streaming site without paying

By Taylor Telford

April 21, 2022 at 2:46 p.m. EDT

Netflix shares erased more than a third of their value on Wednesday after the streaming service unexpectedly reported its first quarterly loss of subscribers in a decade. (Dado Ruvic/Reuters)

The free-viewing party is over at Netflix.

After years of dominance in streaming, Netflix’s foothold is crumbling: It is hemorrhaging subscribers within the overstuffed field of competitors and giving up a chunk of its business as it backs out of Russia. Its stock tumbled 35 percent Wednesday, wiping out tens of billions in market capitalization, after Netflix announced its first quarterly loss in subscribers in a decade. (By its own estimation, Netflix had expected to add 2.5 million subscribers.)

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Now the company is poised to change its strategies, including by exploring lower-cost plans with advertising and by trying to wring money out of the 100 million households that access Netflix without paying by sharing login credentials. Here’s how that might play out for consumers.

Netflix shares tank 35% after it posts 1st subscriber loss in a decade