Netflix is gaining subscribers again – but here’s how it can succeed once people stop signing up
Retrieved on:
Thursday, July 20, 2023
Netflix announced plans to limit sharing earlier this year after experiencing its first subscriber loss in a decade in 2022.
Key Points:
- Netflix announced plans to limit sharing earlier this year after experiencing its first subscriber loss in a decade in 2022.
- Its recent decision to offer cheaper, ad-supported tiers has also played a role in this increase in account numbers.
- But as the video streaming industry has become more competitive over the years, Netflix has had to keep changing its business model to survive.
Network effects
- This subscription-based service came with a US$19.95 (£15.42) price tag and no due dates or late fees.
- The relatively low price helped build an initial critical mass of users, triggering a network effect.
- Since then, Netflix’s business model has continued to be strengthened by network effects.
Conquering content
- Netflix’s large base of users means it can spread the cost of a show over a large number of users, providing content creators with indirect network effects.
- It also triggers a virtuous cycle for users, who return to the platform thanks to the growing amount and variety of content.
- Netflix’s own content creation has built on this.
- This feeds back into the creation of content that is tailored to what the audience wants to see.
Growing competition
- No longer able to count on large flows of new users, Netflix must increase revenues from existing users.
- It started by creating a basic subscription, which includes advertising and cannot be shared, as well as standard and premium subscriptions.
- The latter do not have advertising and allow subscribers to add other people at reduced rates.