- [Narrator] With hits like Squid Game,
Don't Look Up, Bridgerton, and Stranger Things,
Netflix has long been the leader in streaming,
but in April the company reported a drop in subscribers
for the first time in a decade.
- We're getting pretty high market penetration.
And that combined with a competition
is really you know, what we think is driving
the lower acquisition and lower growth.
- [Narrator] The decline is uncharted territory
for the company which is facing growing competition
from other streamers.
- They are maturing,
as other competitors are starting to grow.
- [Narrator] Here are three strategies
that Netflix might try
to break free of their subscriber plateau
and how these methods have worked for other streamers.
- Oh, that that's, that's terrific.
- [Narrator] One strategy that Netflix is already working on
is reevaluating how it creates and acquires content.
- We have to have an Adam Project and a Bridgerton
every month and to make sure
that that's the expectation of the service constantly.
- [Narrator] Netflix has a wide library
that continues to grow.
In 2021, it released more than 500 original programs
according to people familiar with the company strategy.
But it's led to a mixed bag
of hits and misses for the company.
- Netflix spends upwards of $20 billion a year
acquiring programming, making programming.
They don't wanna reduce that amount
but they would like to spend it a little better.
- [Narrator] Consistent quality content has proven important
for gaining and retaining subscribers.
Disney+ and HBO Max saw subscription spikes
for big releases like Hamilton and Wonder Woman '84
but many of those subscribers canceled their plans
within six months.
- You have to strike a balance of keeping the machine going
and fresh stuff coming in without overwhelming
your customer base.
But yes, what you don't want of course are large periods
between new shows coming out and or hit shows returning.
- [Narrator] Another avenue that Netflix has said
they will explore is adding a cheaper ad-supported option
for subscriptions.
- Netflix has been very against advertising,
against the idea of advertising,
the co-founder Reed Hastings has always said
this is a platform built for the viewers,
built for our subscribers.
Our subscribers don't want ads, ads interrupt the content.
- [Narrator] Most other streamers
already offer ad-supported options.
It's been a staple of Hulu's plans for years.
Ad-supported subscriptions make up about 59% of its base.
According data from subscriber measurement company Antenna.
HBO Max began offering a 9.99 subscription with ads
in June of 2021 compared to its regular 14.99
ad-free version.
After about six months
ad supported subscriptions made up about 8% of its base,
according to Antenna.
And Disney+ announced that they'd release a lower cost
ad-supported option later this year.
A small, but growing number of subscribers
are choosing ad-supported plans.
According to Antenna, they accounted for 32%
of streaming signups in 2021
compared with only 19% the year before,
which translated into a small increase
in subscriptions as well.
- Of course, what Netflix doesn't wanna do
is see a lot of their current subscribers
who pay a lot of money to not have commercials
decide economically it's a better bet
to deal with some commercials.
So they're gonna have to balance that out,
but the hope is new revenue from commercials,
new subscribers coming in.
- [Narrator] Saving money accounts for about 30%
of subscription cancellations in the U.S.,
according to survey data
from Kantar Entertainment On Demand.
Offering a lower price might entice more holdouts
who don't wanna pay Netflix's current lowest plan.
- People are being very cost conscious these days.
The idea that you cut the cord
and save money through streaming is a little bit of a myth.
And the more these services go up in price
the more people will realize it's a bit of a myth.
- [Narrator] The trickiest strategy
Netflix wants to focus on
is cracking down on password sharing,
an issue that streamers have been trying to solve for years.
- Streamers have a love hate relationship
with password sharing.
Streamers don't want to be the bad cop
cracking down on people sharing their passwords
but at some point it becomes so widespread
that it affects the bottom line.
- [Narrator] Netflix estimates that password sharing
is losing them a large portion of customers.
222 Million households subscribe worldwide.
But the company estimates that an additional
100 million households access the service
through shared passwords.
- Viewer penetration is made up of two groups.
One is a group that's paying us, which is great.
And then there's a group of viewers that are not paying us
and they're sharing someone else's account credential.
And we really see that second group
is a tremendous opportunity.
- [Narrator] Netflix already has some measures
to prevent password sharing.
There's a limit on the number of profiles
an account can have and different subscription levels
have caps for how many devices can be watching at a time.
Other streamers currently follow similar models.
A new method Netflix might try
is adding an additional charge for accounts used
in more than one household.
They're already testing subscription models
like this in Chile, Peru and Costa Rica.
- There are going to be customers upset.
People get used to getting something for free
or feel like I subscribe,
I should be able to share this with my son
and my daughter who live in another state.
And so they're gonna have to be,
do a good job in explaining that the only way
we can keep bringing you all the programming you love
is to have more revenue to make it.
- [Narrator] Whatever Netflix chooses to do,
the industry will be watching closely.
- With Netflix is going to to try to be more efficient
or to use their words, right size their programming budgets,
that has a ripple effect on the rest of the industry.
I'm sure for the rest of the industry,
they're thinking, great.
These guys have been overpaying
and blowing budgets out of proportion for years.
So now everything may actually return
to some sort of sense of normal.
- [Narrator] In addition to these measures,
Netflix will also likely turn their attention
to international markets like Asia
where streaming is still fairly new and not yet saturated.
(dramatic music)