What is going on with Netflix?
Netflix, one of the most loved product companies, is losing subscribers. They revealed in their quarterly report that they lost 2 lakh (200K) subscribers in the previous quarter. This instantly affected the stock market and we saw Netflix stock go crashing by 37% from 350 dollars to 220 dollars.
Netflix anticipates that 2 million people will leave the platform in the next few months. This stock crash, however, is not unexpected; Netflix was trading at 600 dollars at the start of the year and had dropped by 60% by April. Netflix's stock price peaked at $700 in November 2021 as a result of the pandemic-enforced lockdown.
As the pandemic recedes and we all return to our offline office spaces, the extra time that was available and devoted to Netflix is lost, and people want to cut their expenses because they are not really using the service.
This shift back to the office has not only impacted Netflix, but other companies in the same industry, such as Roku and Paramount Global, have seen their stock prices fall by 5-8 per cent. Zoom, our favourite app in the pandemic, peaked at $400 and is now trading at $100.
Netflix revenue has also been impacted by factors such as the Ukraine-Russia war, which resulted in a loss of 7 lakh (700K) subscribers, and the UK's rising cost of inflation (the highest in the last 30 years), which resulted in a loss of 15 lakh (1.5 Million) subscribers.
Because of the sheer size of the Indian population, Indian markets are usually important for most companies. However, as Reed Hastings (CEO and Co-Founder of Netflix) admitted, Netflix's failure in India has been a tough nut to crack for Netflix.
Understanding the Indian Market and How Netflix Can Improve
For Netflix, in India, the Video on Demand market is divided into two segments: Advertising Video on Demand, in which people are shown advertisements but are not charged for the content, and Subscriber Video on Demand, in which people pay a subscription fee and no advertisements are played.
The revenue for the Ad-based model in 2021 was 1.1 billion dollars, while the revenue for the Subscriber-based model was 800 million dollars, indicating that the Ad-based model is a clear winner here. This is also due to the fact that India's per capita income is much lower than that of many developed countries, where people trade money to save time and remove ads, whereas Indians have to trade time to save money the majority of the time.
India also faces the issue of shared passwords, piracy, and illegal app downloads, all of which reduce revenue, so they created a campaign called "Pappu Pocketmaar" to emphasise low prices and reduce illegal activities. They now intend to launch ad-supported content in India in order to further reduce subscription costs, which currently start at INR 149.
But that's not all; it's not just about money.
People have reservations about the content as well; despite the fact that Netflix spends one of the highest amounts on series production, most people in India who leave the platform believe that the content is hyper-feminist, woke, or for LGBTQ+; they want regular regional content, and anything that leaves them wondering long after the show has ended is not to their liking. As a result, some changes to the content strategy are also overdue.
Furthermore, some others propose introducing yearly subscriptions so that people can break free from the monthly payment cycle while also receiving a discount.
Outside of India also, password sharing is a major issue. Netflix has begun testing the model of charging a fee for password sharing, which is currently being done in Costa Rica, Chile, and Peru. We can see that the company is actively working on making some major changes in the way they do things. It's great to see that they are keeping up with the times, just like their content.
Hope they can figure things out before it is too late.