Netflix users watch less and open the app less often

Netflix Inc. users are watching the streaming service less than they once did, the latest sign of engagement woes for the world’s most valuable entertainment company, according to people familiar with the matter.

Customers aren’t opening the app on as many days a month as they did a couple of years ago, said the people, who asked not to be identified because the data is confidential. The company uses a metric known as QPD, or qualified play days, to measure how often customers use the app.

Also Read: Netflix’s India revenue grows 18% as viewing hours rise 24% in Q3

The average customer is also spending less time watching. While the total time on the app increased by a couple of percentage points in the first half of the year, that’s because more customers have been added. Each individual is watching less.

The decline in those metrics has worried Netflix leadership. It started after the company cracked down on password sharing in 2022 and, at first, executives assumed it would be short-term, because fewer people were using each account. But the trend has continued, raising the risk that people are finding less value in the service or spending more time with rivals.

Netflix has increased its programming budget and is expanding into new categories, such as podcasts and live sports, to attract new customers and retain old ones.

The company declined to comment on internal metrics.

Co-Chief Executive Officer Ted Sarandos told analysts on a call this week that viewership in the US in particular is “just not growing as fast as it could or as fast as we’d like.” But he and Co-CEO Greg Peters also said the company is doing well outside the US and has a very healthy business model.

The decline in usage has been modest and hasn’t led to mass cancellations. The company’s churn in the US has remained steady at 2% and is the best in the industry, according to Antenna, a research firm. Netflix said this week that price increases haven’t led to any abnormal spikes in cancellation.

Shares in Netflix have slipped about 29% this year as investors worry about the company’s slowing growth. Netflix’s overall share of TV viewing in the US has stagnated as customers flock to free services like YouTube. The company reported its third consecutive quarter of slowing revenue growth and projected it would slow again in the current quarter. Netflix said advertising sales this year will fall about $300 million short of their earlier projections, which it blamed on a slower rollout of new products.

Also Read: Netflix issues weak fourth-quarter forecast, shares drop

Netflix hasn’t produced as many new hit TV shows and films as it has in years past and has struggled to attract viewers to second and third seasons of existing titles. Company executives have identified many possible reasons for the decline in usage, including a new user interface, greater competition, worse programming and a dearth of marketing outside of the service.

Apptopia, a firm that tracks mobile app use, has reported signs that Netflix subscribers are spending less time with the service. The share of US subscribers who didn’t open the app rose 16.6% in the third quarter, compared with the prior year, according to Apptopia’s data.

Sarandos and Peters have attempted to quell growing investor concern by saying the company was delivering on its metrics and by touting a strong slate of programming ahead. “Two things can be true,” Peters said in a town hall with employees this week. “We have an enviable growing and profitable business. And at the same time we know there’s more work to do to drive more growth.”

The company addressed its softness in the US by changing leadership. Earlier this month, Netflix fired Chief Content Officer Bela Bajaria, as well as film chief Dan Lin, and cut 6% of the staff. Peter Rice, a veteran of Walt Disney Co. and 21st Century Fox, will now lead the company’s content strategy.

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