Netflix Growth from Falling

Here's how it overcame subscriber loss in 2022

Netflix faced its first subscriber loss in Q2 2022 in over a decade. They lost 200,000 subscribers in Q1 2022 and nearly 1 million in Q2 2022.

Through a strategic shift in content investment, pricing strategy, and password-sharing policies, Netflix reversed the decline and achieved record growth by Q3 2023.

Subscriber growth from Q3 2022 to Q3 2023 was 14.4% YOY

  • Netflix's Q3 2022 subscriber count: 223.09 million

  • Netflix's Q3 2023 subscriber count: 254.04 million

Revenue increase: 7.5% YOY in Q3 2023

  • Netflix's Q3 2022 revenue: $7.93 billion (approximate)

  • Netflix's Q3 2023 revenue: $8.54 billion

Stock price recovery: 344% increase from 2022 low (as of Oct 27, 2024)
As of November 2024, the ad-supported tier has reached 70 million globally.

So what made all this happen?

Let's see.

Problem Faced

Netflix's challenges in early 2022 meant a perfect storm of market and operational issues. The company experienced more subscriber losses, with its stock plummeting 35% in a single day after announcing Q1 results. And multiple factors influenced this:

Market Pressures

  • High competition from Disney+, HBO Max, and other streaming services

  • Widespread password sharing, affecting revenue potential

  • Post-pandemic normalization of viewing habits

  • Market saturation in key regions like North America

Operational Challenges

  • High content costs with varying returns on investment

  • Increasing customer acquisition costs

  • Content quality concerns from subscribers

  • Limited monetization options

The situation threatened Netflix's market leadership position, with Walt Disney briefly surpassing Netflix in total streaming subscribers across all platforms in mid-2022.

The company needed to act decisively to maintain its competitive edge and restore investor confidence.

Netflix's Solution

Netflix implemented a vast three-pronged strategy that addressed both immediate concerns and long-term growth potential:

1. Password Sharing Monetization

  • Launched paid sharing in over 100 countries

  • Introduced "extra member" sub-accounts at $7.99 per member

  • Created a profile transfer feature for a smooth transition to new accounts

  • Developed technical measures to detect and limit unauthorized sharing

  • Communicated changes clearly to minimize subscriber backlash

2. Content Strategy Adjustment

  • Increased investment in local language content, particularly in growth markets

  • Shifted focus from quantity to quality in content production

  • Improved gaming offerings with over 50 mobile games

  • Invested in live programming and sports documentaries

  • Strengthened partnerships with established creators and studios

  • Improved content recommendation algorithms

  • Developed more franchise properties to build subscriber loyalty

3. Pricing Innovation

  • Introduced ad-supported tier at $6.99 to grab price-sensitive customers

  • Maintained premium tier for ad-free experience

  • Simplified plan structure for better customer understanding

  • Created a clear value proposition for each pricing tier

  • Partnered with Microsoft for ad technology and sales

  • Developed sophisticated ad-targeting capabilities

The Results

The strategy proved highly successful, delivering impressive results across multiple metrics

Subscriber Growth

  • Added 8.76 million new subscribers in Q3 2023

  • Reached a total subscriber base of 247.15 million

  • Achieved growth in all geographic regions

Financial Performance

  • Revenue growth to $8.54 billion in Q3 2023

  • Operating margin improvement to 22.4%

  • Average Revenue Per User (ARPU) increase of 4%

  • Ad-supported tier reaching 70 million monthly active users (Nov 2024)

Content Effectiveness

  • Increased viewing hours per subscriber

  • Higher engagement with local language content

  • Improved content efficiency metrics

  • Growing gaming platform adoption

Key Takeaways

  • When things get tough, be ready to change, figure out what's wrong, and fix it quickly while doing things differently.

  • Focus on what will help you succeed in the long run, not just what makes the most money right now.

  • Try many different ways to solve problems.

  • Offer different prices so everyone can find something they like.

  • Show people what they might like and make it easy to find it.

  • Balance what people want with what makes you money.

  • Talk clearly with your customers so they trust you.

  • Try new things, like games, to make your service unique.

  • Work with other people who make great things.

  • Always be ready to fix problems.

  • Try new and exciting things, even if it's risky.

  • Always remember what your customers think.

  • Use your customer data to make the best choices.

Marketers need to build digital relationships and reputation before closing a sale.

Chris Brogan, president, Chris Brogan Media