Over the past year, Netflix (NFLX) has lost nearly $200 billion in value, representing a nearly 70% year-to-date decline in its share price. This follows a quarterly earnings report showing a drop of about 200,000 subscribers on the platform for the first time in a decade. Even more surprisingly, Netflix is ​​forecasting a loss of 2 million subscribers for the second quarter of 2022, down 2%.

These issues have created uncertainty about Netflix’s future as competitors capture larger market shares. Disney+ added 11.8 million subscribers last quarter and HBO Max added 3 million subscribers. Netflix floated the idea of ​​offering a cheaper, ad-based tier earlier this year, a reversal of its historical stance on advertising.

I noticed a few things in the report. Netflix isn’t immune to macropolitical factors. After the Russian invasion of Ukraine, Netflix suspended its service in Russia, resulting in a loss of 700,000 subscribers. Factoring that out, Netflix would have actually added 500,000 subscribers last quarter. Netflix also cited the easing of COVID-19 pandemic lockdowns as justification for slowing growth. I think maybe the historic inflation we’re witnessing has forced families to cut the $10 a month subscription out of their budgets.

This isn’t the first time in its 24-year history that Netflix has faced challenges. Her recent afflictions have motivated me to examine her past struggles. Netflix truly revolutionized entertainment, starting with a DVD rentals-by-mail model. In 2006, Netflix had sales of $1 billion and over 6 million paying subscribers. Deviating from that model, which made Netflix billions in just under a decade, was a huge risk, and it’s clear that Netflix was reluctant to stray too far from the DVD-by-mail service.

In 2007, Netflix began offering streaming movies to its subscribers on its website. This offered a choice of 1,000 titles to stream versus over 70,000 DVD rentals. This feature allowed users of the highest tier subscription up to 18 hours of streaming per month on top of the rentals, while the lower tier got 6 hours of streaming plus a rental. This Watch Now feature has had a mixed reception, with most users complaining about the thin selection and hourly viewing caps. This smooth rollout is also due to the limited technology at the time. The Watch Now feature was only available in Internet Explorer and Windows.

In 2010, streaming began to eclipse DVD rentals. Structural changes like an expanded streaming library, lower monthly costs, support on more devices, user interface changes, and unlimited streaming allowed Netflix’s movie streaming service to outperform DVD rentals. However, they still struggled to leave their DVD roots.

In 2011, Netflix split its subscription into separate tiers, one for streaming and one for DVD rentals, both of which cost $8 a month compared to the $10 price for both services that the company charges has previously used. This 60 percent price increase for subscribers using both services infuriated customers. Netflix fumbled with their answer and decided to fork off a subsidiary called Qwikster for DVD rentals and use Netflix only for streaming. That decision cost Netflix 800,000 subscribers in the third quarter of 2011, and the stock slipped 35%. Netflix quickly scrapped the Qwikster plan and resumed a subscription that allowed for both rentals and streaming. Those fluctuations have analysts questioning whether Netflix has a long-term future in streaming.

As we know, Netflix weathered this disastrous quarter. After a series of strategic partnerships, global expansion, and doubling original programming, Netflix surpassed $5 billion in revenue in 2014. In 2020, Netflix had nearly $25 billion in revenue and 200 million subscribers.

It will be interesting to see what Netflix executives have planned for the future. The entertainment company has begun expanding into video games, hiring a VP of Game Development and acquiring multiple game studios. They’ve continued to double down on original content and created some of the most-streamed shows of all time, including Squid Game, Bridgerton, and Stranger Things. Netflix is ​​also exploring a live streaming service that opens up opportunities for unscripted content and audience participation.

I believe Netflix is ​​able to emerge from this crisis like they did in 2011.

Jackson Griffith is a first-year graduate student in the Master’s program in Public Policy and Administration. He can be reached at [email protected] If you want to respond publicly to this comment, send a letter to the editor [email protected]. The views expressed in this post do not necessarily reflect the views of all employees of The Daily Northwestern.

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