Entertainment powerhouse Netflix saw around 200,000 subscribers no longer using their paid service, according to their Q1 results.
Rather than the TV and documentary streaming giant adding 2 million subscribers in the quarter as expected, the company lost a huge number of subscribers, causing a frenzy amongst shareholders and a subsequent fall of 35% early Wednesday, taking £42 billion off its total valuation.
The company has discussed the possibility of introducing advertisements into the platform as a way to increase revenue streams.
For some, the decrease in subscribers might be an indication of increased competition through other subscription mediums such as Hulu, Amazon Prime and Disney+ and others may suggest it is a sign of rising living costs and households looking to cut back.
Living costs are on the rise
“Living costs have increased significantly in the last year,” explains Ben Sweiry of fintech startup, Dime Alley.
“Things like household bills, fuel costs, energy costs and inflation are rising much faster and higher than typical wages. The average person does not get a salary increase every year, in fact, for most people their wages stay the same, but if things like inflation are up 7% and average household bills have risen by £693, households are going to be worse off.”
The numbers stack up. Inflation is the highest it has been in 30 years and in theory this is not a good thing since low inflation is an indicator of a stable economy. Meanwhile, other sources show that the UK has experienced the highest economic growth since WWII.
In terms of other living costs, fuel has been a big factor, driven by the turmoil in Russia, with the average petrol price rising by 12.6p between February and March. Regulated air fares have increased by 3.8% and some households are also facing higher interest rates on their mortgages, with interest rates rising from 0.5% to 0.75%
All the extra costs are adding up
“The extra costs are adding up for UK households,” explains Richard Dent of online finance company, Finger Finance.
“Netflix is maybe just one of the things that families are giving up. There is probably an expectation to be subscribed to all of these platforms including Sky, Now TV, BT Sport, Netflix, Disney+ and more, even though they are actual luxuries. By removing this entire bundle, families can save more than £200 or £300 per month, so it is possible that other platforms could see a bit of a drop-off.”
“For those trying to stay on top of their finances, you might see an increase in consumer borrowing and this also comes with its risks and falling into a debt cycle to keep up with the jones.”
What is happening with wages?
Figures from the ONS suggest that wages increased by 3.8% between November 2021 and January 2022, but when taking inflation into account, it shows that pay would have fallen by 1% in the last 12 months.
“Families will start to feel the pinch,” says Richard Allan of funding platform, Capital Bean. “Food prices are expected to increase up to 15% due to the conflict in Ukraine, hiking up the prices for things such as poultry, chilled goods and flour.
“Holidaymakers are paying a lot more on average for their holidays too, covering higher fuel costs and the opportunism of the travel industry looking to cash in on increased demand following the pandemic.”
“This could be an opportunity for households to re-assess their income and priorities. Unsubscribing from Netflix is maybe just one step, but taking a longer term view to stay on top of your household income over the next 3 or 5 years would certainly be a good idea.”
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