Netflix Could Be in a Better Position Than You Think

Netflix has been going through some tough times lately, but subscribers shouldn’t be overly concerned about the platform—at least not yet.

No matter how you cut it, Netflix is no longer the streaming powerhouse it was just a few years ago. It’s hemorrhaging subscribers, cracking down on password-sharing households, and is even planning to introduce an ad-supported tier, something that was unthinkable in 2020. Netflix is definitely feeling the pressure of a diversified marketplace and rivals such as Hulu and Amazon Prime, but there’s no reason for current subscribers to abandon ship just yet.

"No, subscribers should not be worried," Jason Ruiz, an associate professor at Notre Dame and a Netflix expert, told Lifewire in an email. "Netflix is the global leader in streaming television and isn’t going anywhere just yet.  We might see a shift in programming or distribution deals down the road, but I think that Netflix’s place in the streaming hierarchy is secure for now."

Don’t Be Scared by the Loss of Subscribers

Legions of members have already been spooked by the latest developments at Netflix, as the platform lost 970,000 members in the second quarter of 2022. That’s a staggering number, but it’s something Netflix was expecting. In fact, the loss of subscribers was less dramatic than anticipated.

"Q2 was better-than-expected on membership growth," reads the Netflix shareholder letter from July 19. "We slightly under-forecasted global paid net adds in Q2 (-1.0 million vs. -2.0 million forecast)."

Benji-Sales, an independent gaming analyst, said on Twitter that the “company is still facing challenges, but [this] is a positive sign.”

The shareholder letter says the company is in a "position of strength" and will seek to "improve its core service" throughout 2022. Netflix stock actually rose after announcing its membership losses—which is a good sign of its financial strength and staying power.

The Password Sharing Problem

Declining subscriber numbers might not concern the average viewer, but the password-sharing crackdown is a different story. The company is experimenting with unique password-sharing strategies in select regions, such as letting members add an additional household to their account for an extra $2.99/month.

It's unclear how this password crackdown will manifest in the US in 2023, but Ruiz thinks it’ll be something that has an impact on subscribers and their wallets.

"I do think it will affect us on the consumer end. The company used to joke about password sharing, but it’s time for them to get serious about what it’s actually costing them. On the consumer side, we will all need to decide how valuable Netflix is to us. Lots of people who have been watching Netflix for years on a ‘borrowed’ account will need to decide if they want to pay. This also relates to the programming issues, as a lack of buzzy original shows will discourage many from pulling out their wallets in order to keep watching."

Netflix would be wise to announce the arrival of password sharing alongside a strong lineup of new programming. This could entice members who are on the fence to continue paying for the service, although pricing would still be a significant factor. So if you see a bunch of great shows revealed for next year, be prepared for an unfortunate follow-up announcement.

For now, however, it’s business as usual for US subscribers.

Ads on Netflix Are a Wild Card

Nobody likes ads, but bringing them to Netflix might benefit some members. As subscription costs continue to rise (a Netflix Premium Plan now runs $20/month), frugal viewers might seek alternatives that are easier on their wallets. Netflix announced earlier this summer that the upcoming ad-supported tier will be "lower priced" than its current plans, although it stopped short of offering a specific number.

If that number is radically lower than its current options, it could lure back lapsed customers. Ads may not have been in Netflix’s original plans, but if they’re done right, they’ll be a big win for the streaming giant and a portion of its community.

But if they’re done wrong, viewers will let Netflix know.

"Ads seem like the next logical step to me," Ruiz told Lifewire. "Netflix will gain from ads, but it will also cost them, as many consumers can no longer tolerate watching ads. A lot of younger viewers came of age after the demise of broadcast TV and have never [had] to watch TV ads. Some might be willing to pay more to not see them. Others will throw in the towel and walk away from Netflix."