Netflix lost customers for the first time in 10 years in the first quarter and is now looking into the possibility of introducing advertising in its low-end packages.
In its latest results, the company says it lost 200,000 customers in Q1 and forecasts a further loss of 2 million in Q2. As of the end of March, it had a total of 221.64 million paid members globally, down from 221.84 million in the previous quarter. Meanwhile, its revenues in Q1 amounted to $7,868 million, up from $7,483 million in the previous quarter. Although net income in Q1 was, at $1,597 million, much higher than in Q4 2021, it was down from $1,707 million in the same period last year.
Netflix says that there are a number of factors at play in its recent performance. Firstly, it does not directly control the pace of growth into its underlying addressable. Secondly, there is the issue of sharing. Netflix estimates that in addition to its 221.64 million paying households, there are an additional 100 million, including over 30 million in the UCAN region, sharing the service. According to CEO Reed Hastings, speaking in a call accompanying the results, it is “now working super-hard” to monetise sharing.
The third factor is competition for viewing which it has faced from linear TV as well as YouTube, Amazon and Hulu for the last 15 years and many new streaming services over the last three years.
The fourth is a number of macro factors including Russia’s invasion of Ukraine. Netflix has suspended its operation in Russia and its figures in the CEE region as a whole have been impacted by the conflict.
Netflix is also now looking into the possibility of introducing advertising in low end plans.
Speaking in the call, Hastings said that although he’s been against the complexity of advertising, he is a “bigger fan of consumer choice”. The cost of low-end plans could even be reduced if they include advertising.
