The world’s biggest streaming platform released its Q1 2022 financial this week with the headline Netflix dips regarding subscriber numbers. The company’s co-founder and co-CEO Reed Hastings just quietly dropped the advertising bombshell tier too during an analyst call.
Netflix detailed reasons why subscriber growth had slowed with key factors being the range of competition and the number of households that now share a Netflix log-in. In addition to Netflix’s 222m paying households, the company estimates the service is being shared with over 100m additional households, including over 30m in North America.
Hastings also said in the analyst call that the company was looking at ways to monetise sharing, something it has been studying for “a couple of years”.
![Netflix](https://www.mediaweek.com.au/wp-content/uploads/2022/04/Reed-Hastings-Headshot.jpg)
Reed Hastings
“When we were growing fast it wasn’t a high priority,” admitted Hastings. “Now we are working super hard on it. There are over 100m [sharing] households that already view Netflix, they love the service, [now] we want to get paid to some degree for that.
“We have great competition [who have] good shows and films. What we have to do is take it up a notch.”
One way Netflix is considering to make sharers pay is to charge people a higher subscription fee if they want to share their account with someone living outside of the home. The company said it didn’t want to shut down accounts it can see where sharing is taking place, but to ask them to “pay a little bit more”. Netflix said it was still in a test phase about how the solution for the sharing challenge might work and before it is rolled out in a major market like the US.
Netflix co-CEO and head of content Ted Sarandos noted on the call that growing subscribers was really as simple as creating great content that will draw bigger audiences. “We need to make TV series, films and now games that people really, really love. Our audience engagement remains super healthy even with heightened levels of competition.”
![Netflix](https://www.mediaweek.com.au/wp-content/uploads/2022/04/Ted-Sarandos.jpg)
Ted Sarandos
Sarandos pointed to the success of new releases like The Adam Project and season two of Bridgerton. “But we need [content] like that every month.” Sarandos said it would continue to look at releasing “big movies” and growing its unscripted library.
When asked about recent price increases in the US and more recently in the UK, Netflix COO Greg Peters said: “There is an impact for a time on churn and audience acquisition, but the vast majority of our members recognise that we are investing the incremental amount we are asking for into entertainment value. More great stories, bigger films and more variety of content.”
Netflix advertisers, start your engines
Hastings raised the possibility of introducing advertising on low cost subscription plans. “Those who follow Netflix know I have been opposed to the complexity of advertising and a big fan of the simplicity of subscription. As much as I am a fan of that I am a bigger fan of consumer choice. Allowing consumers who would like a lower price and who are advertising tolerant get what they want makes a lot of sense. We are looking at that over the next year or two and we are quite open to offer even lower prices with advertising.”
Hastings noted that with advertising, Netflix would work as a publisher and hand the ad management to another specialist company. He noted that an advertising tier seems to be working for Hulu and that Disney+ is also offering it. Hastings was adamant that there would always be an ad-free Netflix tier.
On forthcoming new content, Sarandos started talking about the new season of Stranger Things: “Each episode of the new season feels like a feature film. The finale of Ozark ends in an incredible way and we also have the end of our longest-running show, Grace and Frankie. We are confident the slate we have for 2022 is more impactful than it was for 2021 and we feel 2023 will be more impactful than 2022.”
With Netflix prepared to spend around US$18b on content in 2022, Sarandos was asked if slower subscriber growth would make them pull back to manage costs or spend up to make the platform even more attractive.
“We have to continue to invest in the content, both in the quality and the variety,” replied Sarandos.
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Bridgerton season two
Netflix Q1 2022 hits
Bridgerton (627 million hours viewed for season 21, biggest English language series in Netflix history)
Inventing Anna (512m hours viewed)
Tinder Swindler (166m hours viewed, biggest Netflix documentary film ever released)
The Adam Project (233m hours viewed)