Netflix to lose 700,000 UK customers in two years, analysts predict | Netflix

Netflix is ​​set to suffer a second year of declining UK subscriber numbers in 2023 as the cost of living crisis takes its toll and the streaming giant’s new cheaper, ad-supported service puts pressure on time to convince users.

The world’s biggest streaming service is expected to have lost around 500,000 UK subscribers in 2022 and lose another 200,000 this year as increasingly budget-conscious consumers cut spending.

The company, which has downsized and become more disciplined with its $17billion (£14billion) annual content budget after announcing its first global subscriber drop in a decade earlier this year, will have saw its UK user base grow from 14.2 million to 13.7 million. this year, according to research firm Ampere Analysis.

Netflix, the UK’s most popular service, is expected to be the only major streamer to lose subscribers in 2022. In 2021, the company gained 800,000 subscribers, its lowest since its UK launch in 2012, as consumers approached “Netflix’s peak”.

The launch of Lord of the Rings spin-off The Rings of Power, the world’s most expensive TV show with the first series costing $465m (£336m), has helped rival Amazon’s Prime Video to grow its UK base from just over 12 million to 12.3 million accounts in 2022.

The only major service to maintain significant momentum is Disney+, the newest streaming superpower, launching in the UK in early 2020, which will see market-leading subscriber growth of 1.4 million to bring its British base to 6 million this year.

Netflix subscriptions

Globally, Netflix rebounded from growth in the third quarter, adding 2.4 million subscribers better than expected, thanks to series such as Dahmer and Stranger Things 4. It ended 2022 with the highly anticipated release of Glass Onion: A Knives Out Mystery on December 23.

However, the dire state of the UK economy – with inflation hitting a four-decade high of nearly 11% and the outlook far worse than most major global markets – means that subscribers’ recovery will take much longer. .

“Given the wider economic pressures facing the UK, I do not expect Netflix to return to growth in 2023,” said Richard Broughton, director of Ampere Analysis. “Our baseline assumption is that Netflix returns to growth with the UK economy, which is expected to be 2024.”

Netflix is ​​expected to lose around 200,000 UK subscribers in 2023, and Prime Video is expected to contract around 100,000. Only Disney+, home to popular franchises such as Marvel, Pixar and Disney, is expected to continue to show strong growth, adding 1.4 million new customers expected this year.

In November, Netflix launched its ad-supported subscription offer in the UK and a dozen other markets – priced at £4.99 a month, £2 less than its current cheapest option – as part of an acceleration to a planned rollout next year in a bid to revive its stalled global growth.

Historically, Netflix subscribers have remained loyal despite price increases, but as the cost of packages have become relatively expensive in terms of streaming, but not compared to traditional pay-TV subscriptions, the rate of those leaving the service has significantly increased.

In March, Netflix decided to raise prices for UK subscribers for the second time in less than 18 months.

The introduction of advertising, which Netflix had strongly opposed since the launch of its streaming service in 2007, in exchange for a cheaper viewing experience, should increase the growth rate of new subscribers in the medium term.

Disney followed suit with an ad-supported tier launch in the US earlier this month.

However, the slow initial adoption of Netflix’s offering resulted in lower-than-expected viewing figures. In turn, the company must reimburse advertisers for not meeting targets for the number of ads shown to viewers.

disney

Ampere estimates that the advertising strategy will eventually pay off, increasing Netflix subscribers by 4% more by 2027 – 255 million subscribers worldwide compared to 246 million – than would have been achieved in s sticking to its previous strategy.

In terms of revenue, Netflix would have reached $40 billion worldwide by 2027 had it not launched its new advertising tier. However, instead, the company can expect to generate $43 billion in total revenue, with subscription revenue declining to $36 billion, but advertising rapidly increasing to $7 billion in 2027.

“It’s hard for a business of the scale that Netflix has achieved in many markets to grow,” Broughton says. “It hit a price cap this year. When Netflix raises subscription prices, there is a lot of churn; there had never been. Ultimately, the new advertising tier will help the company win back more price-sensitive consumers. »

Britain’s newest entrant, Paramount+, which hosts content such as Star Trek: Strange New Worlds, Yellowstone, Halo and Top Gun 2, has quickly reached around 3 million users.

However, its growth figures are somewhat flattered by the fact that Paramount+ is offered free to all Sky TV customers who have a cinema package as part of their pay-TV package.

However, overall, almost a million UK households have abandoned the streaming revolution in 2022.

The total number of UK households with at least one paid subscription fell by 937,000 between January and September, according to Kantar Worldpanel.