What’s Going on With Netflix?
Netflix has suffered its first subscriber loss in about a decade, resulting in a 25% drop of its shares amid concerns that the pioneer of the streaming service industry may be in decline. The company’s subscriber base plummeted by 200,000 during the January-March period, according to the company’s quarterly earnings report released recently. It’s the first time that Netflix’s subscribers have fallen since the streaming service became available throughout most of the world.
Some experts speculate that there are several factors that are contributing to the subscriber loss that are outside of the company’s control, such as inflation forcing customers to cut back, and Netflix having to pull its service in Russia, losing the service around 700,000 customers. But in our opinion, Netflix’s problems can be broken down to increased competition in the streaming market, and an outdated and insufficient content strategy and catalog.
There are two major factors that can help a streaming platform succeed: Trendy hits that attract attention and convince people to subscribe, and then a robust catalog of material that will keep people watching after they’ve caught up on the latest trendy hit. People may very well sign up to Netflix for “Squid Games” or “The Tiger King”, but they’ll stay to watch “You’ve Got Mail” or “Blade Runner”.
For many years Netflix owned the trendy title game, making it necessary for everyone to subscribe and check it out. But since the growth in popularity of Apple+’s “Ted Lasso” and Disney+’s “The Mandalorian”, other services have learned to play the same game, probably even better than Netflix itself. Although Netflix had a first-mover advantage and shifted the paradigm for entertainment consumption, other players have caught up and even surpassed Netflix in quality original content production — demonstrated clearly by Apple’s recent Best Picture win, something Netflix had been striving to achieve for years.
A successful streaming service needs to balance consistently producing current hits with producing or acquiring content that is constantly in demand year after year (i.e., classics), and ensure they build a library of content that has the staying power to keep people coming back to watch when it’s recommended. When Netflix originally transitioned from DVD-by-mail to a streaming service, it began to build an audience off other people’s content. While Hulu and HBO Go were around technically during many of those years, Netflix was the major player in streaming content, so NBC, Warner Bros and Disney licensed their TV shows and films to Netflix.
Over time, reruns of popular TV shows became more popular with younger generations on the streaming service than any of the original, traditional channels that they aired on. But other major film and television studios have started to realize that by licensing their material to Netflix, they were creating a competitor, and it is just good business to build their own streaming services and take back their most popular titles, so “Friends” ended up on HBO Max and “The Office” on Peacock.
This put significant pressure on the need for content originally created by Netflix. When they lost so much content they used to syndicate on their platform, they had to foot the bill for their content catalog and accept the risk of ‘hit or miss, and Netflix, thus far, has not proven a consistent ability to keep up in quality original content to the same extent as its newfound competitors.
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