Netflix’s decline: What Happened? - Center for Digital Society (2024)

Author: Jasmine Noor Andretha Putri
Editor: Annisa Pratita Kirana Mantovani

For a decade, Netflix has positioned itself in the forefront of the streaming industry, where it saw its subscribers count grow exponentially. With more than 220 million subscribers, it is now the world’s leading streaming service. With more content digitization, streaming service has expanded over the years as more companies like Disney and Apple dipped its toes in this lucrative industry. The COVID-19 pandemic has also played a part in the boom of streaming services’ subscribers as lockdowns turned people into consuming more entertainment content. However, in 2022, Netflix reported that it had lost 200,000 subscribers during the first quarter, which is their first subscriber decline in more than a decade.[i] Netflix’s shares also experienced a drop in its stock price, even falling 35% in a day.[ii] The drop in subscribers shows the possible slow down of Netflix’s growth as it faces more competition in the industry and criticisms for proposed unpopular policies such as crackdown on password-sharing. This article will talk about the rise and current decline of Netflix and what can be expected for the future of the platform.

The Rise of Netflix

Netflix was launched in 2007 in the US, where it positioned itself as a new form of consuming entertainment. It promises a format where subscribers can enjoy advertisem*nt-free contents at their own pace, allowing them to choose what TV series and films they want to watch at that time. It was a new way of consuming entertainment, where it takes out the hassle in watching TV and high prices of cable TV. While the catalog consisted of pre-existing movies and TV shows, in 2012 saw Netflix starting to create their own original content exclusively for the platform. The past decade has seen the meteoric growth of Netflix, shown by its strong subscriber count of 222 million users in 190 countries.[iii] The COVID-19 pandemic accelerated the growth of streaming services, where people all over the world stuck at home during the pandemic and boosted subscription numbers. Content wise, these companies are spending large amounts of money on their platform’s ‘originals’, such as Netflix’s spending of $17 billion on content creation in 2021.[iv] The Netflix model has arguably transformed the entertainment industry and launched a new market of emerging streaming services, as more companies are trying to create their own streaming services. Some rivals of Netflix include Disney+, Hulu and Apple TV, each vying to have a good standing in this ‘streaming war’.

Netflix in decline?

As Netflix has experienced a non-stop growth for the past decade, its loss in subscribers might come as a surprise. It stops the continuous growth of Netflix and causes its shares to plummet as well. Adding to its subscriber loss in Q1 2022, Netflix says that it expects to lose another 2 million subscribers in Q2 2022.[v] This decline can be attributed to some surrounding factors. The first is the increasing price of Netflix through the years. Their competitors are offering cheap prices in their services in comparison to Netflix, with an equally good quality of content roster. In comparison Netflix Indonesia’s most expensive package costs Rp186.000 per month whilst Disney Hotstar costs Rp39.000 per month. This price difference also happens in other countries, where competitors such as Disney+, Apple TV and Hulu offer a way cheaper price per month than Netflix. Some have also criticized Netflix that with its high subscription price, their content selection is not up to par with its competitors.[vi] With its competitors – such as Disney+ with its Marvel and Star Wars selection – offering quality content with a fraction of the price and rising cost of living worldwide, it might lead its users into changing their preferred streaming platform.

Another factor is the saturation of the streaming market. When it first launched, Netflix was at the forefront of the untapped streaming market. Yet now, there are so many streaming platforms, with their own specialities. Even though the pandemic pushed the streaming market to their all-time highs, the end of the pandemic also signaled that this growth is slowing down sector-wide. Developed markets (North America and EU) are reaching saturation point and Netflix will not be likely to find many new subscribers in these places.[vii] Viewers may be overwhelmed by the amount of services that are offered in the market, where a Nielsen study found that a significant amount of users felt that way.[viii] New studies also show that there might be a potential shift in what millennials and Gen Z like. An expert says that younger generations and teenagers are consuming more content on YouTube and TikTok, and have shown less interest in streaming TV and film in comparison to the previous generation.[ix] This preference shows the generational shift on the preferences of how people consume entertainment.

What will happen next?

Despite the decline in overall subscribers count, Netflix is still the market leader in the streaming industry.[x] Its service has also entered a significant number of countries that haven’t been tapped by other streaming platforms, such as the Asia-Pacific region. In the region, Netflix’s subscribers count in several countries are still growing. This gain helped balance the losses Netflix had in North America and Europe.[xi] Another way Netflix is trying to increase its subscriber base is by making an ad-supported tier available in their service. This tier will be offered at lower price points for consumers who want to cut down their spending on streaming platforms and possibly expand their subscriber base.[xii] While it is not yet official, this tier of service would address the problem of Netflix price rise by offering a cheaper option to consumers.

To increase their revenue, Netflix is also looking to crack down on users who share their account. In March 2022, it announced that it is going to test out features that will allow accounts to share their passwords with other people outside of their households, albeit with an extra fee.[xiii] Netflix will launch this feature in three countries – Chile, Costa Rica and Peru – and allow the account owner to add subsidiary accounts for people who don’t share their household with. Despite it still being in their trial process, this feature will let Netflix gain more revenue through the 100 million Netflix users that share their accounts with people outside of their households. Netflix has also expanded its service to the gaming industry, in which the card game Exploding Kittens will be launched soon in their app.[xiv] In the end, one thing that Netflix should give importance the most is improving the quality of their offerings. Netflix has been criticized lately for not having enough quality content in facing their competitors. If Netflix were to attract more customers, it would be through their content catalog and how they can consistently create quality TV shows and movies – without the show runners fearing they could be suddenly canceled. Ultimately, in facing declining subscribers and more streaming competitors, Netflix should focus and improve the most on the center of their service – their contents.

[i] Stokel-Walker, C., 2022. The Real Threats to the Future of Netflix and Streaming. [online] Time. Available at: <https://time.com/6172680/netflix-streaming-future/> [Accessed 18 May 2022].

[ii] Ostroff, C. and Banerji, G., 2022. Netflix Stock Price Drops 35%, Posting Biggest Fall Since 2004. [online] The Wall Street Journal. Available at: <https://www.wsj.com/articles/netflix-stock-price-plunges-premarket-after-subscriber-loss-11650449002?mod=hp_lead_pos1> [Accessed 18 May 2022].