Netflix is facing growing concerns over declining viewer engagement, with customers opening the streaming app on fewer days and spending less time watching content than they did a few years ago, according to people familiar with the company’s internal data.
The trend has continued despite the company’s efforts to attract and retain subscribers through increased spending on programming and expansion into new areas, including podcasts and live sports. The development has raised concerns among Netflix executives that users may be finding less value in the service or turning to competing platforms.
The company tracks engagement through a metric known as qualified play days, or QPD, which measures how often customers use the app. People familiar with the data said the average customer is opening Netflix on fewer days each month than a couple of years ago. They requested anonymity because the information is confidential.
Although the total time spent on the platform rose by a couple of percentage points in the first half of the year, the increase was driven by subscriber growth rather than greater engagement from individual users. The average customer is watching less content.
Netflix declined to comment on its internal metrics.
Declining engagement raises concerns despite stable cancellations
The decline in viewing activity has worried Netflix leadership. The trend began after the company launched its crackdown on password sharing in 2022. Executives initially expected usage to fall temporarily as fewer people shared individual accounts, but the decline has persisted.
The slowdown has not, however, resulted in a wave of cancellations. Netflix’s US churn rate has remained steady at 2%, the lowest in the industry, according to research firm Antenna. The company also said this week that recent price increases had not triggered any abnormal spikes in cancellations.
Co-chief executive officers Ted Sarandos and Greg Peters have sought to reassure investors about the company’s performance. Speaking to analysts this week, Sarandos acknowledged that US viewership was “just not growing as fast as it could or as fast as we’d like”. Both executives maintained that Netflix was performing well in international markets and had a healthy business model.
Peters also addressed concerns about growth during a town hall with employees this week.
“Two things can be true,” he said. “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.”
Shares slide as growth and advertising prospects come under scrutiny
Netflix shares have fallen about 29% this year as investors grow concerned about slowing growth. The company’s share of television viewing in the United States has stagnated as audiences increasingly turn to free services such as YouTube.
Netflix reported its third consecutive quarter of slowing revenue growth and projected that growth would slow further in the current quarter. It also reduced its advertising sales forecast for the year by about $300 million, attributing the shortfall to a slower-than-expected rollout of new products.
External data has also pointed to weakening engagement. Apptopia, which tracks mobile app usage, reported that the share of US Netflix subscribers who did not open the app increased by 16.6% in the third quarter compared with the same period last year.
Netflix has struggled to produce as many new hit television shows and films as in previous years, while attracting viewers to second and third seasons of existing titles has become more difficult.
Company executives have identified several possible reasons for the decline, including a redesigned user interface, intensifying competition, weaker programming and insufficient marketing outside the platform.
Content leadership shake-up aims to revive growth
Netflix has responded to the slowdown by making changes to its senior leadership and workforce. Earlier this month, the company dismissed chief content officer Bela Bajaria and film chief Dan Lin, while cutting 6% of its staff.
Peter Rice, a veteran executive at Walt Disney Co. and 21st Century Fox, will now lead Netflix’s content strategy. The leadership changes come as the company seeks to strengthen its programming slate and improve viewer engagement.
Netflix continues to increase its programming investment and explore new categories, including podcasts and live sports, in an effort to attract new audiences and retain existing subscribers. However, the company faces pressure to demonstrate that these investments can translate into stronger viewing figures and sustained revenue growth.
Despite the concerns, executives have maintained that Netflix’s underlying business remains healthy. The challenge now is to persuade audiences to return to the platform more frequently and spend more time watching its content.