As the world's biggest and most popular streaming platform, Netflix seems like it can do no wrong.
The multimedia company's growth has been exponential over the past decade – so much so that Netflix recently announced plans to branch out into making video games that will come at no extra cost to its global subscriber base.
Despite the positive reception to this announcement, as well as Netflix posting $7.3 billion in revenue for the second quarter of 2021, not everything is rosy at the streaming giant's headquarters. Why? Because Netflix has actually lost subscribers in its key North American stronghold.
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Revealed during the company's Q2 2021 earnings report (per The Hollywood Reporter (opens in new tab) and Variety (opens in new tab)), Netflix announced that it had posted a loss of 430,000 subscribers in the US and Canada.
Overall, Netflix's subscriber base has grown by 1.5 million between Q1 and Q2 2021 – the streamer landed nearly one million new paying users in the Asia-Pacific region alone – and currently leads its streaming rivals with a 209 million global subscriber base.
However, Netflix is noticing a slowdown in the growth of its user base. In Q1 2021, the company had forecasted that it would add 6 million new users to its subscriber base, but the actual figure of 4 million was 33% smaller than estimated.
Netflix hopes to increase its user base by 3.5 million new subscribers in Q3 2021, which is a more modest outlook based on its Q2 2021 figures.
Analysis: why has Netflix noticed a downturn in users in 2021?
For its part, Netflix believes that there are two main reasons for the decrease in its North American user base and a slowdown in growth overall.
The first reason? Covid-19. Netflix hasn't been immune to the effects of the ongoing pandemic, just like every other global business, and subscribers have had to decide whether they can continue to pay the monthly subscription fee that, for a Premium subscription, can cost $17.99 (£13.99) per month.
Speaking during the Q2 earnings report call (via THR (opens in new tab)), Netflix CFO Spencer Neumann said: "It really boils down to Covid, frankly. For us, at a minimum it creates some short term choppiness in the business trends."
Netflix co-CEO Reed Hastings added: "We had those 10 years that were smooth as silk, and we are just a little bit wobbly right now."
As for the second cause, Netflix attributes the increase in competition from other in-demand entertainment-based apps, such as TikTok and YouTube, for a slowdown in growth.
As reported by Variety, a Netflix Q2 2021 earnings report letter reads: "In the race to entertain consumers around the world, we continue to compete for screen time with a broad set of firms like YouTube, Epic Games and TikTok (to name just a few). But, we are mostly competing with ourselves to improve our service as fast as we can. If we can do that, we’re confident we can maintain our strong position and continue to grow nicely as we have been over the past two-plus decades."
Valid as these two reasons are, though, has Netflix's propensity to cancel fan favorite shows another cause behind the slowdown in its paying customer base?
In 2021 alone, Netflix has pulled the plug on 10 TV series, including Sherlock Holmes spin-off The Irregulars, a live-action adaptation of Mark Millar's comic Jupiter's Legacy and Jamie Foxx sitcom Dad, Stop Embarrassing Me!
A quick social media search, for some of the series that Netflix has cancelled this year, shows that there was (opens in new tab) (and still is (opens in new tab)) an audience (opens in new tab) for them.
If some Netflix fans are growing increasingly disillusioned that their favorite shows are constantly being cancelled, why would they continue to support a streaming platform that does so?
Sure, Netflix is a business and, given that it'll have felt the financial impact of the Covid-19 pandemic, it will have had to make budget cuts and cancel some shows.
The fact remains, though, that the streaming giant has lost subscribers in one of its key territories – and it can't be a coincidence that some users have ended their subscriptions in the same quarter that Netflix cancelled shows with a cult following.
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