After more than a decade of uninterrupted growth, Netflix suffered its first subscriber drop in the first three months of 2022. The world’s largest video streaming service ended the quarter with 221.64 million paid memberships, down 200,000 from the previous quarter. To make things worse, Netflix expects to lose significantly more subscribers in the ongoing quarter, forecasting 219.64 million paying customers for the end of June.
To an extent, Netflix became a victim of its own success during the pandemic, when its subscriber base grew much faster than it would have been expected to under normal circumstances. “The big COVID boost to streaming obscured the picture until recently,” the company writes in its latest letter to shareholders, saying it clouded its view of “growth headwinds” faced by the streaming leader. According to Netflix, the company’s high household penetration, increased competition and account sharing are making it difficult for the company to keep the growth momentum going, especially in unfavorable macroeconomic circumstances, with geopolitical tensions, sluggish growth and high inflation weighing on consumers’ minds and wallets.
As the following chart shows, Netflix’s streaming business grew from 24.4 million subscribers at the end of Q1 2012 to 221.6 million a decade later, as streaming became the new normal, upstaging linear TV in many respects. For the long term, Netflix is still bullish on its growth potential, citing hundreds of millions of broadband households across the globe that don’t subscribe to the service yet. The company also estimates that more than 100 million households are currently sharing another one’s account, and is currently working on ways to “monetize” those users, i.e. clamp down on account sharing.
