Following the release of Netflix’s Q1 2022 results where it reported that it had lost 200,000 subscribers and predicts that it will lose another 2 million subscribers in Q2;

Tammy Parker, Principal Technology Analyst at GlobalData, a leading data and analytics company, comments:

“Netflix has shied away from acknowledging the changing competitive landscape and avoided looking in the mirror to see where it needs to improve. Netflix’s Q1 earnings letter to shareholders cited external factors that it says are creating growth headwinds, but most of these are far from being new issues and only serve to highlight the company’s own internal weaknesses.

“The five notable areas where Netflix remains vulnerable include competition, pricing strategy, content investment, password sharing and expansion into gaming. Netflix has been, until recently, incredulous regarding the threats posed by new streaming competitors like Disney+. This left Netflix unprepared, and now it is scrambling to react. Netflix should understand that many current and former customers have ‘been there, done that’ when it comes to Netflix and are interested in trying out the bevy of competing streaming services. Plus, there is an untapped pool of younger consumers who may never sign up for Netflix.

“Additionally, Netflix’s pricing strategy must evolve, especially as inflation eats away at consumers’ wallets, making them choosier about their streaming subscriptions. Netflix raised prices across all plans in the US during January, which seems to have been especially poor timing. Furthermore, Netflix’s plans are poorly differentiated, as they all offer the same content and only vary in terms of video quality and number of screens supported. With Disney+ planning to launch a cheaper, ad-supported tier this year, it’s time for Netflix to reconsider its opposition to that approach.

“Another challenge is that Netflix needs to maintain heavy content investment, not only in its mature markets like the US but also newer markets worldwide where it must support development of regionalized content. However, the multiple Academy Awards won last month by Apple TV+ film CODA highlight the fact that rival streaming services are also investing in quality programming and are positioned to outbid Netflix on the next hit shows.

“Netflix is correct to cite password sharing as a detriment to its growth. Password sharing became an issue as soon as Netflix refocused its business model from mailing out DVDs to streaming content, so this is not a new problem. In fact, password sharing is a threat across the streaming industry and does not only impact Netflix. Any success Netflix has in shutting down unauthorized password sharing will be closely watched and potentially copied by every streaming player.

“Finally, Netflix’s expansion into mobile video games shifts focus from its core competency in passive entertainment to an active entertainment sector in which it has no experience. It remains to be seen whether getting its claws into the ‘Exploding Kittens’ franchise will help Netflix generate significant interest from gaming-focused Generation Z and other age groups.”