Things are not looking good right now at Netflix. The streaming giant announced that they've lost over 200,000 subscribers in the first three months of 2022 and expect that figure to continue to rise. This in turn lead to shares slumped by 35% and their market value dropped by an eye-watering $50 billion.
So, what's the problem? Well Netflix have got a couple of excuses. Their main one is password-sharing and they estimate that 100 million non-paying households watch this way. I'm not totally convinced this is the big solution they think it is. Many families legitimately share a Netflix account and if Netflix's attempts to stop password sharing interrupt their viewing than they too might end up leaving the service. It also seems unlikely that people who don't pay are suddenly going to start paying when they can't access for free anymore. Surely they will just go elsewhere?
This is Netflix's biggest problem. They were the first company to go big with streaming but now everyone else is catching up to the idea. People just can't afford to subscribe to every streaming service. Back in the day Netflix had the rights to pretty much everything because they were the only service going. But now companies are keeping their intellectual property to themselves. Disney have Disney+, Warner Bros have HBO Max, Paramount have Paramount Plus. Meanwhile Amazon are investing heavily in all sorts of properties including buying MGM and getting their back catalogue and making a hugely expensive Lord of the Rings show.
Netflix is struggling to create the buzz it once did. For one thing it drops all it's episodes at once but the likes of Disney+ and Apple TV+ have found that they can extend the buzz for their shows by dropping episodes weekly. Sure, things like Squid Game and Bridgeton are big but people binge-watch it over a week and then forget about it.
The other big issue Netflix has is the quality of their content. One of the reasons they have been able to attract some big name creators is that they don't really interfere in the way traditional studios would. This is alright for someone like Martin Scorsese who knows what he is doing but actually so many Netflix projects could have done with some notes from the studio to correct them. Netflix also produce a huge amount of content hoping some of it turns out good whereas Apple TV+ in particular have had success by producing far fewer shows and films but ensuring the quality is consistently high. The quantity not quality approach doesn't work very well.
Of course the other streamers have some great things to attract customers. Amazon have the addition of free next day delivery and all sorts of other bonuses whilst Apple is tied in with their popular hardware. Other streamers have intellectual property that Netflix can only dream of with Disney doing great guns with Marvel and Star Wars and HBO Max having some big event stuff like the Friends and Harry Potter reunions and Zack Snyder's Justice League. Netflix have a few smaller properties from Universal and their own content, with many of their biggest shows coming to an end in the not too distant future.
So what can Netflix do to compete? Well one of the answers may be to introduce a lower price plan or even a free one where content comes with adverts. They are a bit behind on this already though with others already finding success with this model, including Amazon with their IMdb+ service which is being rebranded as Freevee. They also need to work out what customers want. Instead of churning out huge amounts of stuff and hoping something might become popular, they need to produce much less and make it good. Apple TV+ are the masters of this and despite a fairly small number of shows they've made critically acclaimed TV including The Morning Show, Ted Lasso and more recently Severence.
Is this the beginning of end of Netflix? It's hard to tell at this point. Certainly they are still the original and the biggest streamer and as people continue to cut down on streaming services due to the cost of living crisis many will not choose Netflix as the first one to go. They may have reached a bit of a slump but all it could take is a couple of big shows and things go quickly turn around. It may be that some of the smaller streaming services begin to fail and rights to big property might appear on the market again and Netflix will have the opportunity to sweep them up. In the short term, they are big enough to take a big of damage but it's clear that they need a bit of a re-think if they are going to keep continuing to grow.
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