Following the news that Netflix lost almost a million subscribers in Q2 2022;

Francesca Gregory, Thematic Analyst at GlobalData, a leading data and analytics company, offers her view:

“Netflix’s dismal year continues, with churn rates hit by market saturation and a deepening cost of living crisis in its core markets. The company’s subscriber stats paint a bleak, post-peak stream picture, so Netflix is overhauling its monetization strategy as it attempts to return to winning ways. Its unwillingness to change has made it slow to respond to industry headwinds, leaving it in a position where it now needs to water down its original product to retain its market position.

“Netflix’s recently announced partnership with Microsoft highlights the firm’s hasty steps to roll out an ad-supported tier in the hopes this will stem the mass exodus of cash-strapped streamers. However, the streaming giant remains behind the curve, with competitor Discovery+ having already pipped it to the advertising-based video on demand (AVOD) post and Disney+ set to launch its ad-supported tier later this year.

“Netflix must also balance integrating ads and maintaining its immersive user experience. The user experience aspect of Netflix’s offering could be threatened by its crackdown on password sharing. The company is testing measures to prevent piggybacking in Argentina, El Salvador, Guatemala, Honduras, and the Dominican Republic. While only a test run, the risk of alienating subscribers already considering unsubscribing should not be understated.

“Among Netflix’s more heavy-handed approaches to reverse its fortunes are subtle changes to its content strategy. The release of season four of the hit series ‘Stranger Things’ in two parts is a shift from the platform’s previous ‘all at once’ approach, encouraging both binging and high churn rates. Quality content that is strategically released will be the key to sustained viewer engagement in the future.”

Listen to Francesca talk more on the subject in GlobalData’s latest Instant Insights podcast episode, which is available on Youtube or Spotify.