The Hazy Future of Netflix
October 19, 2022
Netflix is the most popular streaming service in the United States. The company found an unprecedented amount of success in 2007 when it began allowing users to stream shows directly through the internet without ever having to leave the comfort of their home. Ultimately, this would be the downfall of video stores such as Blockbuster. However, over the past several months, Netflix has been experiencing an economic downturn.
The economic downturn Netflix is facing stems from a wide range of factors. One of these factors is that Netflix reported in its quarterly report that it actually lost subscribers in the last quarter. According to Forbes, Netflix has not experienced a loss in subscribers in over a decade. The poor performance of Netflix’s first quarter has weighed heavily on its stock value.
Netflix started out 2022 valued at just under $600 per share. As of May 2022, it was valued at just under $200 per share, and it has rebounded slightly to $270 a share now.
Reuters claims that Netflix is now being hit with a shareholder lawsuit that accuses Netflix of having been misleading the market about the ability for them to keep increasing their subscribers. Netflix projected to add 2.5 million subscribers in their first quarter of 2022, but instead lost 200,000 subscribers.
When news broke of the loss in subscribers, the value of Netflix’s shares dropped over 35% in a single day. The lawsuit hopes to recover financial damages due to the sharp decrease in the value of Netflix’s stock.
Netflix blames several culprits for causing their loss of subscribers. One culprit is believed to be password sharing. CNBC states that Netflix has an estimated 100 million households using a shared password. Netflix believes that password sharing results in a 6 billion dollar loss in their revenue each year.
In an attempt to recoup some of this lost revenue, Netflix will begin cracking down on password sharing. Fortunately for those who do share passwords, Netflix has no immediate plans to suspend accounts sharing a password. Rather, Netflix plans to add a fee to each additional account that does not reside at the same address as the main subscribers account.
Another reason Netflix has seen a decrease in subscribers results from the Russo-Ukrainian War. Due to the harsh and unwarranted attacks by Russia on Ukraine, companies around the world have removed their services from Russia in an attempt to send the Russian economy into a downward spiral. Netflix removed their services from Russia, which resulted in the loss of just under 1 million subscribers.
In an attempt to combat this boycott of streaming services, Russia has legalized the piracy of movies, video games, and more, reports IGN.
Further blame for the loss of subscribers is placed upon rival streaming companies. The streaming market continues to become increasingly more saturated, and there are new streaming services that are cheaper and more appealing than Netflix. These new companies have a much brighter future for growth than Netflix, and many analysts believe that the days of Netflix’s impressive growth are over.
While Netflix will still continue to be around, it will be unlikely to continue the same high stock growth that people became accustomed to. However, there is still hope for Netflix as it plans to start rolling out many mobile games in 2022. It is reported that Netflix will add up to 50 mobile games in 2022. Netflix may be hoping to gain a competitive edge on their rivals with this launch. Unfortunately, it is unclear at this time how this will have a significant impact on stopping their loss of subscribers.
Ultimately, it is possible that the Russian boycott and password sharing issues faced are significant enough to have placed Netflix in this position, and that if the Russian boycott ends and password sharing sees a significant crackdown, Netflix will once again see growth in its subscriptions. However, many analysts believe that the glory days of Netflix’s stock are behind it, with just 41% of analysts having a “buy” rating on Netflix when news broke of its loss in subscribers. At 41%, Netflix’s “buy” rating was the lowest Netflix had received since 2015.