With apologies to rap artist and business mogul Jay Z, Netflix has got 200,000 problems, but content ain’t one of them. That’s 200,000 paid subscribers who left the service by the end of the first business quarter in March. And worse, the company’s own bean counters are already predicting it a shocking 2 million more subscribers will be gone by the end of June. It’s the first time in 10 years that Netflix has lost subscribers, and its precipitous fall is sending shockwaves through the entire world of streaming services.
After all, Netflix is the O.G. of streaming services, the one that others used as a blueprint, the one that pioneered developing original content and the one which locked down exclusive production deals with stellar talent. I’m a longtime Netflix subscriber, and it’s remained a staple in my streaming portfolio, even as I’ve added a couple of other services. Nights of struggling with the Amazon Prime Video platform remind me why I stick with Netflix. With Prime, I’m generally ready to scream trying to execute a simple task like reversing because Prime’s system is clunky and slow. My family and I have given up trying to group watch on Prime Video, and Prime has never had the breadth and depth of Netflix’s global offerings.
Netflix is the home of original pop culture hits “Tiger King” and “Bridgerton,” plus Nigerian ‘Nollywood’ films and vintage TV series, which entice frequent rewatching. So, you may be asking, why is this media giant quickly becoming a case for Harvard Business School?
In a word, stealing — politely known as password sharing. The one-paying-subscriber-many-unpaying-users is common practice. And common knowledge among Netflix executives. In 2016 co-CEO Reed Hastings explained, “Password sharing is something you have to learn to live with.” Back then, he said Netflix was “fine with it,” but the company has recently been testing a new feature — called a subaccount — in Chile, Costa Rica and Peru. The paid subscriber pays an additional small fee for users outside their household, allowing Netflix to gradually add fees for unpaid users. In recent interviews, Netflix has also hinted that it is open to inserting ad breaks into content, the very thing the company originally said would never happen. And the pledge that has made its service especially appealing to consumers.
For sure, the COVID shut-in cemented Netflix’s number-one place in the streaming market. But I would argue that the company’s real retention power is linked to its emphasis on the service part of streaming service. I’m sure customer flight began when they changed the much-loved practice of releasing a series’ entire season — the original deal — to either dividing series into a couple of big drops or parsing out episodes weekly, like old-fashioned TV, the most infuriating change. Who said they wanted that? Nobody, like me, paying premium subscription prices!
At 221 million subscribers, Netflix is still the biggest power player on the streaming block. But the stock market tumble apparently prompted talk about adding live sports, and puzzling cancellations of popular shows like the edgy “Archive 81.” (By the way, whoever decided to dump multiple seasons of “Downton Abbey” two weeks after the new Downton movie comes out, needs to go. Duh? We’ll all want to rewatch.)
Netflix execs, maybe now is a good time for you to ponder some well-known lyrics from the aforementioned Jay Z, “A loss ain’t a loss, it’s a lesson.”
