| Friday, 27 September 2024 |
An abridged, narrative version of the latest episode of Two by Two, The Ken’s premium weekly business podcast Subscribe here
Good morning [%first_name |Dear Reader%],
If you are a premium subscriber of The Ken, you can listen to the latest full, subscriber-only episode of Two by Two on The Ken’s mobile app here, and on Apple Podcasts here.
Our story begins in 2022.
It’s 19 April, and Netflix has just reported its first-quarter earnings for the year. Just a few months earlier, Netflix had given investors a guidance that it expects to gain 2.5 million subscribers in the first quarter. A fairly conservative number.
In the earnings call, Netflix tells a stunned audience of analysts and investors that, for the first time in its history, Netflix has lost 200,000 subscribers.
While they are still recovering from the shock, it gives them some worse news—Netflix expects to lose another 2 million subscribers the next quarter.
The company’s stock price crashed 20% following the call. This was the day that those analysts and investors had been dreading. After a decade and more of dominance and acquiring subscribers in every major country, just like Alexander the Great, Netflix had no more lands left to conquer.
So Netflix did what any company would do—it decided to extract more from less. It said it would crack down on users who shared accounts and passwords, and that it would build new ad-supported tiers and reduce spending on content.
It took them two years of toil, but it worked.
As of yesterday, Netflix’s stock is trading at US$705—an all-time high since it went public. It added 8 million subscribers in this quarter (after adding 9 million odd in the previous one). Almost all of these gains have come from convincing people who had earlier shared accounts and passwords to upgrade and buy.
But now, analysts and investors are worried about how long Netflix can keep this up.
And there’s a growing belief that Netflix’s future rests not in the West, but in one specific country. India.
Netflix has always believed in India. When Netflix lost subscribers everywhere in that first quarter of 2022, it gained subscribers in Asia Pacific—the largest market of which is India.
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