Saturday, July 23, 2022

Is Netflix in trouble?

Netflix is often referred to as a "giant streaming service."  For years, it has dominated the world of internet streaming like a colossus.  However, the landscape has changed dramatically since the company launched its service back in 2007.  That's why the July 19th report of its second quarter earnings is not really surprising.  

For the first time in a decade, Neflix reported a loss of an additional 970,000 subscribers.  Obviously, that is not a positive trend.  Yet it is actually better than the company had anticipated.  Netflix had projected a second quarter loss of two million subscribers.  That's why its stock price increased by more than six per after-hours trading upon news of its second quarter results.

Tom Fitzgerald, in a July 19th article in Forbes magazine is cautiously optimistic about the future of Netflix.  He writes that "Netflix predicted it would return to black among subscribers in the third quarter, projecting it will add one million.  Last year during the same period, it added 4.4 million, so while recovery is significant, the company is still nowhere near returning to its peak boom period."

Netflix will probably always play a significant role in the streaming world.  It's doubtful, however, that the company will ever return to the prosperity it enjoyed during its peak boom period.  It has lost its monopoly and it faces stiff competition.  New streaming services are popping up like weeds in a field.  There are far more choices than when the company began streaming in 2007.  It is  no longer the only kid in town.  It has to share the market with Amazonn Prime, Disney Plus and others.

Greater competition is not the only challenge facing Netflix.  There are also other factors involved in the decline of the company's subscribers.  For example, it removed itself from the Russian market when the war in Ukraine broke out.  Furthermore, Netflix has increased its prices and cancelled shows.

A Netflix monthly subscription currently costs $9.99 for the Basic Plan, $15.99 for Standard, and $19.99 for Premium.  In April, the company announced that it would introduce a new lower priced subscription plan for consumers.  In addition to the ad-free Basic, Standard and Premium plans, Netflix decided to team up with Microsoft as a global advertising technology and sales partner.

The powers-that-be at Netflix are clearly concerned.  The second quarter results came a day after the service announced that it would start testing a new system which would enable it to crack down on pas account sharing, which it has blamed for some of its woes.  It's certainly no secret that users share their passwords outside their households.

Netflix boasts approximately 220.67 million paid subscribers worldwide and it remains a formidable streaming service.  It will not be easily toppled like a house of cards.  It owes it success to its content, including the return of popular shows such as Stranger Things.  Yet, the company faces enormous challenges.  It's future depends on how well it deals with those challenges.

- Joanne

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