Netflix Stock Drop

Netflix loses over 200k subscribers in the first two months of 2022, causing the stock to drop by 35%, losing more than 50 billion dollars in market value, and hitting a five-year low. There are many factors that contribute to this result, but it was mainly caused by password sharing and increased competition from rival streaming services. 

Firstly, customers are sharing passwords. Netflix estimated that there are more than 100 million additional households that use Netflix, which means that these users are watching for free. This is a major issue, as it causes Netflix to lose about $25 billion a year, according to Citi analyst Jason Bazinet. 

Secondly, there has been an increase in streaming services that are in competition in the market in recent years, more than ever. Back in 2007 and 2008, there were only a couple of streaming services other than Netflix, such as Hulu, Amazon Prime, or even Blockbuster. However, in recent years there has been an influx of competition in the way, which was supported by the increase of customers due to covid and being stuck at home. This is further supported by the statistics, as more than 85% of US households are subscribed to major streaming services (source: Kantar) and are paying an average of 47 dollars per month. Netflix’s subscription is one of the most expensive paid subscriptions on the market. However, many customers are complaining that they don’t get what they want from their $30 Netflix subscription. With this subscription fee, it is really hard for the platform to maintain old subscribers or even attract new customers. 

In the future, the company claimed that the customers who are sharing passwords might need to pay more, and they are also considering adding commercials and monetization. Right now, Netflix is charging an additional fee to add “sub accounts” for up to two people outside the home. Even though the pricing of additional subscriptions differs from country to country, the fee averages about around $2-$3.

https://www.nexttv.com/news/netflix-losing-dollar6-billion-a-year-on-password-sharing-analyst-says

https://www.kantar.com/north-america/inspiration/technology/has-the-us-video-streaming-market-reached-saturation