Netflix is expected to suffer a second year of falling subscriber numbers in the UK in 2023 as the cost of living crisis takes its toll and the streaming giant’s new cheaper, ad-supported service takes time to win over users.

The world’s biggest streaming service is expected to have lost about 500,000 UK subscribers in 2022 and to lose a further 200,000 this year, as increasingly budget-conscious consumers cut back on spending.

The company, which has cut staff and become more disciplined with its $17bn (£14bn) annual content budget after earlier this year reporting its first global subscriber declines in a decade, will have seen its UK user base drop from 14.2 million to 13.7 million this year, according to the research firm Ampere Analysis.

Netflix, the UK’s most popular service, is predicted to be the only major streamer to have lost subscribers in 2022. In 2021, the company gained 800,000 subscribers, its lowest since launching in the UK in 2012, as consumers approached “peak Netflix”.

The launch of Lord of the Rings spin-off The Rings of Power, the world’s most expensive TV show with the first series costing an eye-watering $465m (£336m), helped rival Amazon’s Prime Video grow its UK base from just over 12m to 12.3m accounts in 2022.

The only major service to maintain significant momentum is Disney+, the newest streaming superpower, launched in the UK in early 2020, which will report market-leading growth of 1.4 million subscribers to take its UK base to 6 million this year.

Globally, Netflix bounced back to growth in the third quarter, adding a better-than-expected 2.4 million subscribers, thanks to series including Dahmer and Stranger Things 4. It ended 2022 with the highly anticipated release of Glass Onion: A Knives Out Mystery on 23 December.

However the dire state of the UK economy – with inflation running at a four-decade high of almost 11% and an outlook significantly worse than most major world markets – means the subscriber recovery will take significantly longer.

“Given the wider economic pressures the UK is facing I’m not expecting Netflix to go back to growth in 2023,” says Richard Broughton, director at Ampere Analysis. “Our base assumption is Netflix moves back into growth with the UK economy, which is likely to be 2024.”

Netflix is forecast to lose about 200,000 UK subscribers in 2023, and Prime Video is set to contract by about 100,000. Only Disney+, home to popular franchises including Marvel, Pixar and Disney, is predicted to continue to show strong growth, adding an expected 1.4 million new customers this year.

In November, Netflix launched its ad-supported subscription offer in the UK and about a dozen other markets – priced at £4.99 a month, £2 less than its current cheapest option – in an acceleration to a planned rollout next year in a bid to reignite its stalled global growth.

Historically, Netflix subscribers have remained loyal despite price increases but as the cost of packages have become relatively expensive in streaming terms, albeit not compared with traditional pay-TV subscriptions, the rate of those leaving the service has increased dramatically.

In March, Netflix moved to raise prices for subscribers in the UK for the second time in less than 18 months.

The introduction of advertising, which Netflix had been steadfastly against since launching its streaming service in 2007, in return for a cheaper viewing experience is expected to increase the rate of new subscriber growth over the medium term.

Disney followed suit with an ad-funded tier launch in the US earlier this month.

However, slow initial uptake of Netflix’s offering has meant lower than expected viewing figures. In turn, the company is having to refund advertisers for failing to hit targets relating to the number of ads delivered to viewers.

Ampere estimates that the ad strategy will eventually pay off by boosting Netflix subscriber numbers 4% more by 2027 – 255 million global subscribers compared with 246 million – than would have been achieved sticking to its previous strategy.

In terms of revenues, Netflix is forecast to have hit $40bn globally in 2027 had it not launched its new ad tier. However, instead the company can expect to bring in $43bn in total revenues, with subscription income shrinking to $36bn but advertising rapidly growing to $7bn in 2027.

“It is difficult for a business of the scale Netflix has reached in many markets to grow,” says Broughton. “It has hit a ceiling on price this year. When Netflix raises subscription prices now there is a lot of churn; there never used to be. Ultimately, the new ad tier will help the company to recapture more price sensitive consumers.”

The newest UK entrant, Paramount+, home to content such as Star Trek: Strange New Worlds, Yellowstone, Halo and Top Gun 2, has rapidly surged to about 3 million users.

However, its growth figures are somewhat flattered by Paramount+ being offered for free to all Sky TV customers who have a cinema package as part of their pay-TV bundle.

However, overall almost 1m British households gave up on the streaming revolution in 2022.

The total number of UK homes that have at least one paid-for subscription fell by 937,000 between January and September, according to Kantar Worldpanel.