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For the first time ever, Netflix has reported a drop in subscriber numbers. The streaming giant lost over 200,000 subscribers during the first quarter of the year and expects to lose 2 million more in the next quarter. While this drop isn’t blamed on piracy, illegal downloading and streaming pose a critical concern in the competitive streaming business.
As the first major legal streaming service on the Internet, Netflix paved the way for a streaming revolution.
The company initiated competing with piracy from the get-go, branding itself a superior alternative.
At some point, the company even used illegal download statistics as market research, to determine what shows and movies should be added to its library.
‘Piracy is No Match’
In the early days, Netflix seen piracy as an opportunity rather than a threat. According to CEO Reed Hastings, piracy could even help to create demand for the superior streaming service, which was a fine thing.
“Certainly there’s some torrenting that goes on, and that’s true around the world, but some of that just creates the demand,” Hastings said at the time.
Hastings appeared to be right as Netflix went through a period of unprecedented growth, with hundreds of millions of subscribers signing up. In the span of just a few years, Netflix became 1 of the largest media empires with its own content manufacturing arm.
This success story didn’t go unnoticed by the Hollywood incumbents; and that’s when things initiated to change.
Inspired by Netflix’s success, major Hollywood gamers such as Disney and HBO initiated their own exclusive streaming services, while Amazon and Apple also joined in. These and other companies are now combating for the same share of household budgets that are sadly not limitless.
Netflix Subscribers Decline
For the first time in its history, Netflix reported a drop in subscriber numbers yesterday. This came as a disappointment to analysts and it was a shock for the streaming service as well, which predicted modest growth during this period.
Following the announcement and a new forecast, which expects subscriber numbers to drop by 2 million during the second quarter, the company’s stock tanked.
There’s a variety of factors that resulted in this surprise drop. The waning pandemic likely didn’t help, nor did Netflix’s crackdown on password sharing or the decision to leave Russia. And of course, competition performs a major position as well.
Over the years, several studies, experts, opinionators, and Elon Musk suggested that the increasingly fragmented streaming panorama would only hold piracy relevant. While many households are pleased to sign up for 2 or 3 subscriptions, a dozen monthly payments is often a bridge too far.
It wouldn’t surprise us if some former Netflix subscribers canceled their subscriptions and went on to pirate instead. Netflix titles are regularly listed among the most downloaded movies and TV shows on pirate websites. This is a global trend that also affects the US.
There is no reason to consider that piracy caused the drop in subscriber numbers. However, people may start to pirate Netflix shows more often after they primarily canceled the service for an unrelated reason. This is a tricky development, as new habits are easily formed.
Once people know how to get their favorite shows without paying, there are fewer incentives to resubscribe. With subscriber numbers dropping, piracy is posing a critical concern.
This isn’t news to Netflix. While Reed Hastings wasn’t apprehensive about piracy a decade ago, the company now spends millions of dollars tackling the dispute. The streaming giant joined the MPA a few years ago and is also a member of the anti-piracy coalition ACE.
In addition, Netflix also has its own in-house anti-piracy department which has been increasing steadily over the years.
The question of whether enforcement is the best answer stays. Even if piracy magically disappeared, many people nonetheless can’t afford a dozen streaming subscriptions. Perhaps the fragmented streaming panorama and subscription fatigue are the real problems?