Netflix Sheds Subscribers for Second Quarter in a Row

After more than a decade of uninterrupted growth, Netflix has been suffering a drop in subscriber numbers in 2022. The world's largest video streaming service ended the second quarter with 220.7 million paid memberships, down almost one million from the previous quarter, when a smaller loss of around 200,000 paying customers had occurred. For Q3, Netflix is projecting it will gain subscribers once more, compensating the one-million loss.

To an extent, Netflix became a victim of its own success during the pandemic, when its subscriber base grew much faster than it would have been expected to under normal circumstances. "The big COVID boost to streaming obscured the picture until recently," the company wrote in its Q1 letter to shareholders, saying it clouded its view of "growth headwinds" faced by the streaming leader. In Q2, Netflix added that it continued to improve its product, content and marketing and was also looking to better monetize its big audience, hinting at a password-sharing crackdown that is currently being rolled out. A cheaper, ad-supported membership scheduled to start in 2023 could also potentially lure new customers after recent price hikes.

As the following chart shows, Netflix's streaming business grew from 30.4 million subscribers at the end of Q4 2012 to a high of 221.8 million almost a decade later, as streaming became the new normal, upstaging linear TV in many respects. For the long term, Netflix is still bullish on its growth potential, citing hundreds of millions of broadband households across the globe that don't subscribe to the service yet. The company also estimates that more than 100 million households are currently sharing another one's account.