Netflix Hit a Subscriber Peak. Here Are 3 Strategies They Might Try to Keep Growing | WSJ

- [Narrator] With hits like Squid Game, Don't Look Up, Bridgerton, and Stranger Things, Netflix has long been the leader in streaming, but in April the company reported a drop in subscribers for the first time in a decade. - We're getting pretty high market penetration. And that combined with a competition is really you know, what we think is driving the lower acquisition and lower growth. - [Narrator] The decline is uncharted territory for the company which is facing growing competition from other streamers. - They are maturing, as other competitors are starting to grow. - [Narrator] Here are three strategies that Netflix might try to break free of their subscriber plateau and how these methods have worked for other streamers. - Oh, that that's, that's terrific. - [Narrator] One strategy that Netflix is already working on is reevaluating how it creates and acquires content. - We have to have an Adam Project and a Bridgerton every month and to make sure that that's the expectation of the service constantly. - [Narrator] Netflix has a wide library that continues to grow. In 2021, it released more than 500 original programs according to people familiar with the company strategy. But it's led to a mixed bag of hits and misses for the company. - Netflix spends upwards of $20 billion a year acquiring programming, making programming. They don't wanna reduce that amount but they would like to spend it a little better. - [Narrator] Consistent quality content has proven important for gaining and retaining subscribers. Disney+ and HBO Max saw subscription spikes for big releases like Hamilton and Wonder Woman '84 but many of those subscribers canceled their plans within six months. - You have to strike a balance of keeping the machine going and fresh stuff coming in without overwhelming your customer base. But yes, what you don't want of course are large periods between new shows coming out and or hit shows returning. - [Narrator] Another avenue that Netflix has said they will explore is adding a cheaper ad-supported option for subscriptions. - Netflix has been very against advertising, against the idea of advertising, the co-founder Reed Hastings has always said this is a platform built for the viewers, built for our subscribers. Our subscribers don't want ads, ads interrupt the content. - [Narrator] Most other streamers already offer ad-supported options. It's been a staple of Hulu's plans for years. Ad-supported subscriptions make up about 59% of its base. According data from subscriber measurement company Antenna. HBO Max began offering a 9.99 subscription with ads in June of 2021 compared to its regular 14.99 ad-free version. After about six months ad supported subscriptions made up about 8% of its base, according to Antenna. And Disney+ announced that they'd release a lower cost ad-supported option later this year. A small, but growing number of subscribers are choosing ad-supported plans. According to Antenna, they accounted for 32% of streaming signups in 2021 compared with only 19% the year before, which translated into a small increase in subscriptions as well. - Of course, what Netflix doesn't wanna do is see a lot of their current subscribers who pay a lot of money to not have commercials decide economically it's a better bet to deal with some commercials. So they're gonna have to balance that out, but the hope is new revenue from commercials, new subscribers coming in. - [Narrator] Saving money accounts for about 30% of subscription cancellations in the U.S., according to survey data from Kantar Entertainment On Demand. Offering a lower price might entice more holdouts who don't wanna pay Netflix's current lowest plan. - People are being very cost conscious these days. The idea that you cut the cord and save money through streaming is a little bit of a myth. And the more these services go up in price the more people will realize it's a bit of a myth. - [Narrator] The trickiest strategy Netflix wants to focus on is cracking down on password sharing, an issue that streamers have been trying to solve for years. - Streamers have a love hate relationship with password sharing. Streamers don't want to be the bad cop cracking down on people sharing their passwords but at some point it becomes so widespread that it affects the bottom line. - [Narrator] Netflix estimates that password sharing is losing them a large portion of customers. 222 Million households subscribe worldwide. But the company estimates that an additional 100 million households access the service through shared passwords. - Viewer penetration is made up of two groups. One is a group that's paying us, which is great. And then there's a group of viewers that are not paying us and they're sharing someone else's account credential. And we really see that second group is a tremendous opportunity. - [Narrator] Netflix already has some measures to prevent password sharing. There's a limit on the number of profiles an account can have and different subscription levels have caps for how many devices can be watching at a time. Other streamers currently follow similar models. A new method Netflix might try is adding an additional charge for accounts used in more than one household. They're already testing subscription models like this in Chile, Peru and Costa Rica. - There are going to be customers upset. People get used to getting something for free or feel like I subscribe, I should be able to share this with my son and my daughter who live in another state. And so they're gonna have to be, do a good job in explaining that the only way we can keep bringing you all the programming you love is to have more revenue to make it. - [Narrator] Whatever Netflix chooses to do, the industry will be watching closely. - With Netflix is going to to try to be more efficient or to use their words, right size their programming budgets, that has a ripple effect on the rest of the industry. I'm sure for the rest of the industry, they're thinking, great. These guys have been overpaying and blowing budgets out of proportion for years. So now everything may actually return to some sort of sense of normal. - [Narrator] In addition to these measures, Netflix will also likely turn their attention to international markets like Asia where streaming is still fairly new and not yet saturated. (dramatic music)

Channel: The Wall Street Journal

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Keywords: netflix, subscribers, netflix 2022, netflix series, netflix strategy, netflix business model, netflix business strategy, netflix movies, stranger things, dont look up, bridgerton, squid game, netflix decline, netflix competition, netflix competitors, streaming video, video streaming, streaming services, hulu, hbo max, disney plus, amazon prime, streaming, disney+, best tv streaming services, netflix ads, netflix password sharing, password sharing, netflix plans, netflix news

Id: 9vO0tNmGR2k

Length: 5min 56sec (356 seconds)

Published: Tue May 03 2022