Things will get worse for Netflix before they can start to get better

Mike, Jonathan, Argyle, and Will race to meet up with Eleven in Stranger Things season 4
(Image credit: Netflix)

"It's tough losing a million subscribers and calling it success," Netflix Co-CEO Reed Hastings told investors as the company revealed its results for the second quarter of 2022. 

No kidding. 

Before Netflix even published its investors' report last night (July 19), everyone with the slightest interest in the company's fortunes knew what was coming. There was no question that Netflix's subscriber base was going to shrink – the only question was, by how much. 

The company had estimated about two million, but in the end, the number was a bit less than half of that prediction, at just over 970,000. A smaller dip in subscribers than expected caused the company's share price, which had been in the doldrums, to rebound by 10%, and the service's profits to hit $7.97bn. That latter figure is pretty close to $8.04bn, which is what many analysts expected.

In their report to investors, Netflix has been pretty bullish about the rest of 2022, even announcing growth of their subscriber base by one million within the next three months. 

For me, that's wishful thinking. There's a single reason why the loss isn't more devastating, and Hastings himself pinpointed it in the same earnings interview.

"If there's one thing, it's Stranger Things," he replied when asked why he was talking about a drop of one million as opposed to two. Hastings isn't wrong, but it's a play he and the rest of the Netflix executives won't be able to make for at least another year. 

And that's why I'm predicting another drop in numbers in three months' time, and not a growth.

The price is right

Spencer Neumann, Netflix's Chief Financial Officer, attributed the drop to the price increases the service wheeled out at the start of 2022, adding that he believed that "...there's slightly higher churn post the price change." 

He and the other key members at Netflix's helm are clearly of the mind that people have taken the price increase on the chin and anyone who hasn't canceled Netflix yet is here to stay. I take issue with that. 

Netflix's slate for the first half of 2022 has been strong. Ozark had its fourth and final season; Bridgerton came back for a second run; The Umbrella Academy returned; buzzy drama Inventing Anna arrived; and there were two installments of Stranger Things

Jonathan Bailey in Bridgerton season 2

(Image credit: Netflix)

Stranger Things has been such a juggernaut, it has broken all of Netflix's records. The show is so key to Netflix's fortunes that the second installment of its fourth season dropped on July 1, the day after Netflix closed the book on 2022's second quarter. Why? Because I'm willing to bet that that was the day a lot of people were planning on clicking the cancel button – after they'd watched the first installment finale, of course.

There won't be any more new episodes of Stranger Things for at least a year, and looking at the back half of this year, Netflix's slate is not nearly as strong.

Increased competition

While Neil Gaiman's The Sandman has a dedicated fanbase, it's a new and unknown proposition. The Crown won't be with us until the end of the year. On the plus side, Netflix's movie slate is pretty good, with action spectacular The Gray Man, Knives Out sequel Glass Onion, and vampire smash-em-up Day Shift, to name but a few.

The Gray Man, with its massive budget and stars like Ryan Gosling and Chris Evans, might nab a few new subscribers, but consumers are savvier now, and they are not as sticky as Netflix hopes they are.

Netflix's competition have also gotten much tougher. Apple TV Plus is having a stellar year. Its flagship show, Ted Lasso, is coming back, alongside a big movie slate. HBO Max is about to welcome House Of The Dragon and sparky drama Industry. Prime Video is preparing to launch Lord Of The Rings: The Rings Of Power. In an environment where people are being much, much choosier about how they spend their cash, Netflix might just feel the pinch.

This was always going to happen

Sarandos closed out the investors' call by saying, "We have some headwinds right now and we are navigating through them."

He's right. We're in the midst of a cost-of-living crisis and people are being very careful where they spend their money. Netflix is facing a different kind of consumer: People who are happy to do a month here and a month there. Netflix had a glut of shows with dedicated fanbases at the start of the year, but now its slate looks a bit leaner. 

So I'm predicting more losses for the back half of 2022. Maybe in early 2023, when the company's lower cost, ad-supported tier is here, when Bridgerton, Stranger Things, and YA hits like Shadow and Bone and Sweet Tooth return, we'll be talking about growth once again. 

Tom Goodwyn
Freelance Entertainment Writer

Tom Goodwyn was formerly TechRadar's Senior Entertainment Editor. He's now a freelancer writing about TV shows, documentaries and movies across streaming services, theaters and beyond. Based in East London, he loves nothing more than spending all day in a movie theater, well, he did before he had two small children…