During the first quarter of 2022, Netflix recorded a net loss of 200,000 subscribers to its streaming service for the first time in over a decade; however, Netflix remains the leader in SVOD services.

According to Parks Associates OTT Tracker data, Netflix maintains an estimated 67 million customers in the United States. Netflix executives claim to have 222 million paying subscribers worldwide, but estimate an additional 100 million using a shared password to gain access to the service.

To mitigate the revenue loss from this quarter’s decrease in subscriptions, Netflix announced two strategies: focusing on password sharing and launching an AVOD tier service.

The account sharing plan that Netflix is proposing would potentially allow customers to opt-in but is likely a few years away for those in the United States. Tests of this model are set to be implemented in select countries outside of the US and will allow account administrators to add up to two users outside of their families at a small cost. That is, the account sharing cost is optional for subscribers who choose to participate.

Parks Associates consumer research indicates that video service providers may reduce the motivation for password sharing by restricting the number of users who can stream from the service simultaneously. One-third (34%) of individuals who share their online video credentials with others have been unable to access a service because there are too many people signed in. Password sharing has a negative impact on the user experience for online video users and might be a deterrent to engaging in such conduct when concurrent streaming limitations are in place.

An AVOD service where customers subscribe to an ad-supported version of the service at a lower price point is also being discussed. Parks Associates’ latest data show that 27% of internet households watch ad-based (AVOD or FAST) OTT services. Consumers are enticed by AVOD and FAST services because it allows them to access a massive content library at no extra cost to them, but it would also allow brands and advertisers to collaborate and capture a significant portion of marketing and advertising budgets. By creating this new tier, Netflix could become the darling of the advertising business, capturing a significant portion of marketing and advertising budgets. However, this is a risky strategy because some users may choose a lower tier of service if offered, thus cutting revenue from the primary SVOD business they are aiming to protect.

It is worth noting that while Netflix lost subscribers, those who use the service are the most stable and loyal of all OTT video service user bases. Customers continue to recommend the service because of the vast library of content it offers, and despite periodic price increases, continue to praise the service as being good value for the money.

Contributor: Sarah Lee