Faced with its first subscriber losses and a stock market price that has been falling for many months, Netflix is deploying a new strategy to seek out new customers, one by one.
It was a massive blow expected by Netflix. In the second quarter of 2022, nearly one million people left the platform. Three months earlier, a loss of 200,000 subscribers had dealt the company its first setback in 10 years.
In addition to this complicated start to the year, the streaming pioneer has to play with a complicated stock market price. On November 17, Netflix recorded its all-time high by breaking the $700 mark. But since then, confidence has eroded and the stock has been oscillating since the end of April around 200 dollars.
Device against the exchange of passwords
Although expected, this blunder still forces Netflix to react. In the coming months, the platform will therefore change its strategy. Until now, it only had to deploy in a market to garner subscribers. Now we have to go find them.
To do this, two methods are available to Netflix. The first is to look for people who have already been won over by the service, but who benefit from it for free. Lax for many years, the company is preparing to deploy a device against the exchange of passwords between friends.
In experimentation since March, a new offer must authorize account sharing, for a fee. The streaming leader plans to charge around an additional 3 euros to accounts whose use is not located solely in the subscriber’s main residence.
100 million households affected
The first sanctions fell in Honduras, Argentina, El Salvador, Guatemala and the Dominican Republic. But in the coming months, the supplement will no longer be reserved for Latin America and will extend to the whole world, including France.
This first option should allow Netflix to optimize its profits. According to the company, around 100 million households are missing out on it due to password sharing. A far from negligible number since it represents about half of current customers.
In its second quarter financial results, the platform counted 220.67 million paying ones. In France, the number of subscribers crossed the 10 million mark, indicated the co-CEO of Netflix, Ted Sarandos, at the beginning of July.
Towards targeted advertising?
Second action plan to increase its income, the video on demand leader wants to lower its entry price. For this, one of the company’s founding promises has been broken: Netflix is about to introduce an offer that includes ads.
With a cheaper subscription, the service wants to attract new customers by compensating for the shortfall with advertising revenue. A partnership with Microsoft has been signed in this direction. The computer giant must constitute a platform so that advertisers can integrate advertising during the broadcast of programs.
This new source of income risks opening the Pandora’s box of the use of personal data. In order to collect more money for the diffusion of the same advertisement, the company could present it to a certain category of its subscribers.
When announcing the partnership, Greg Peters, Netflix’s COO, said Microsoft “provides strong protections for subscriber privacy.” The potential targeting of advertisements has not yet been confirmed or denied.
Loyalty through video games
However, Netflix has already indicated that not all programs will be available via this low-cost offer. While a vast majority of titles are included, discussions are still ongoing with a few studios, such as Sony Pictures, Universal and Warner Bros.
However, Ted Sarandos, the chief executive of Netflix, wanted to be reassuring: “If we were to offer this subscription today, users would still enjoy a good experience”, he indicated during the presentation of the company’s results at the end of July.
By invoicing “fraudulent” users or lowering its entry price, Netflix intends to regain a new impetus for growth. To retain regulars or convert the last undecided, the platform offers a new service: video games.
The company has also given itself the means to achieve its ambition by acquiring a first video game studio, Night School Studio, in September 2021. This new service has been available to subscribers since November 2021.
No broadcasting of sports competitions
But the diversification of the platform should stop there. While its competitors are positioning themselves on the broadcast of sports competitions, Netflix has warned that it would not be interested in this activity.
The priority objective is to reverse the trend of subscriptions. The company plans to regain one million subscribers in the third quarter of 2022. And this, even before the implementation of its reconquest strategy.