Why Netflix Shares Dropped? | Where Netflix Went Wrong?

Damini Bhandary Damini Bhandary
Apr 22, 2022 6 min read
Why Netflix Shares Dropped? | Where Netflix Went Wrong?

As humans, our main source of entertainment has always been movies and series. Two decades ago, television was the main form through which we used to get our daily dose of entertainment. Flash Forward to two decades later, Streaming services have taken the place of television. People are now more into OTT platforms for their dose of entertainment and these streaming services are also serving them with regular movies, series, reality shows and everything that can entertain them.

Topping the list of streaming platforms is Netflix. Netflix was founded in the year 1997 by Ted Sarados and Reed Hastings. It started offering streaming services in 2007 and since then it hasnโ€™t looked back. There is hardly anyone who doesnโ€™t know about Netflix and hasnโ€™t used it to watch a movie or a series at least once. According to Netflix, they have over 222 million subscribers from all over the world. Therefore, it is not wrong to say that it is the most popular streaming service.

However, recently the biggest streaming platform has encountered some pretty big roadblocks and somehow they are the only one who is responsible for this. Netflix was eyeing to add 2.5 million new subscribers in the first quarter. However, the opposite happened, Netflix has lost over 200k subscribers in a couple of months and 37% of its shares plummeted in a single day. In this article, we will talk about what has gone wrong with Netflix, why it is losing its subscribers and why its shares dropped for the first time in a decade. So, without any further ado, letโ€™s get started.

Netflix Share Drop
โ€œThere is a revolution happening, and within two years I think that Wi-Fi and Netflix will be built into all the televisions.โ€ -Reed Hastings

What Reasons Is Netflix Giving for Share Price Fall?
Where Netflix Went Wrong?
What Will Netflix Do Now?

What Reasons Is Netflix Giving for Share Price Fall?

After the drop in the share prices, Netflix has given three reasons for the loss of its subscribers and they are:

Increase in Price

Netflix Subscription Plans

Netflix has increased their monthly subscription price in recent times. ย UK subscribers are said to be paying three times more for what they used to pay two years ago for the same service. This has created quite a stir amongst the subscribers. Although Netflix said that the increase of the price is to provide more quality content and experience to their customers, the sudden hike in the prices in the UK and Ireland was frowned upon by the public.

Netflix Exit From Russia

Just like many other companies Netflix also suspended their operation in the country because of the ongoing conflict between Russia and Ukraine The Russia-Ukraine war is another major cause of the subscriberโ€™s loss of the platform. Netflix stopped all their services in Russia after the country declared war on Ukraine. Over this course, Netflix has lost over 700k subscribers because of the escalation of the war.

Sharing of Passwords

Netflix said that the sharing of passwords with other households is also the reason for the loss of subscribers. According to reports, 100 million households are enjoying the streaming service free of cost, with the help of password sharing. As mentioned above Netflix has over 222 million subscribers and these people are sharing their passwords with their friends, extended family and relatives.

Where Netflix Went Wrong?

While in this situation, some of the decision by Netflix has backfired and are constantly frowned upon by the customers. Those decisions are:

From its very existence, Netflix as a platform never included ads in their services and the brand value has always been about improving the customer experience. Unlike other streaming services, Netflix avoided advertising and believed that it could do better business without it. In a sudden shift in the platformโ€™s belief, the CEO of the streaming giant revealed that they are planning to introduce advertising on the platform in one or two years. Contrary to their previous statement where they said they will not use advertisement and. This is going opposite of their brand values as they have always focused on improving the customer experience. This decision came after Netflix was reported of losing over 2 Lakhs subscribers. According to them, it is to lower the price of the subscription.

Sharing Password Crackdown

This is probably the biggest blunder the streaming giant has done. As mentioned above, there are over 200 million subscribers of Netflix in the world but along with that 100 million households are sharing the passwords of their accounts with others. Password sharing was never a problem and one of the reasons the streaming platform was popular because of this and how consumer-friendly it was, until now. ย Netflix reasons that the increase in their price structure of the subscription is because of password sharing, so to decrease the subscription cost they have decided to stop password sharing.

Being Insensitive

The worst thing, a business can do is treat their customers as criminals. As mentioned above, Netflix is on the verge of banning password sharing among households in America. However, before that Netflix is reported to fine accounts in Costa Rica, Peru and Chile who share their password with others. This somehow is quite triggering and seems unfair to certain cultures of the world and is tarnishing the image of the brand.

Bad PR

It takes a lot of time to build the reputation of a brand but it takes a second to get it crumbled. Netflix as a brand always focused on customer experience and entertainment. However, the recent news of cracking down on passwords, increasing the subscription price and introducing ads on the platform shows that they have become money-hungry and are not that consumer-friendly anymore. This way, the damage has already been done and the PR of the company hasnโ€™t even done their job properly, which has resulted in such a stir. As they are now changing their core strategy, customers are finding it infuriating.

Cease to Innovate

Netflix has been famous for its great and unique content. However, in recent times, people believe that the streaming service has stopped making unique and innovative content. They are creating content that are mundane and repetitive. This way they are forgetting the basic thing that made them successful.

What Will Netflix Do Now?

Netflix is right now in deep trouble. There is still no definite answer as to when Netflix will stop losing subscribers. It is the first time in a decade that the streaming giant has received such a blow. In fact, the worse is still not over as Netflix has already said that it will lose more subscribers with the current scenario. By the next quarter, it is predicted to lose 2 million more subscribers. Netflix is currently gearing up to follow its decision of introducing ads on the platform and banning password sharing. However, it is not clear if these two decisions will be able to revive Netflix or it will make it fall more into the abyss.

Conclusion

Netflix is submitting itself to the current Global financial situation and thus it has seen a drop in its shares and such a big one for the first time in a decade. Their way of handling the situation and lack of proper PR seems like they are only thinking about their revenue. So their decision of introducing ads and password crackdown make them look like they are shifting from being a customer-centric company to just a money-hungry organization. If proper steps are not taken any sooner, Netflix will lose more subscribers and maybe its USP as well.

FAQs

Why did Netflix lose 200k Subscribers?

Netflix is losing its subscribers because it recently has decided to put a ban on sharing the account passwords by consumers.

Who is the founder of Netflix?

Reed Hastings and Marc Randolph are the founders of Netflix.

When was Netflix founded?

Netflix was founded in the year 1997 and started its streaming service in 2007.

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