Last week was a difficult one for the streaming giant Netflix. The stock price had dropped 35%, which is the company’s most significant loss since 2004. According to industry reports, ahead of the first quarter of the year, the company had initially projected a gain of 2.5 million subscribers but found themselves facing the harsh reality that they had instead lost 200,000 subscribers. While some of the losses were due to the company pulling out of Russia due to the Ukraine invasion, other factors contributed to the streaming service’s startling downturn in value.
The streaming wars have begun in earnest, with competition from other companies, including Disney Plus, Amazon Prime, and Paramount Plus. All of which have other means of gaining capital, such as theme parks, order from home services, and merchandising. In contrast, Netflix’s core model is its streaming services. At the end of 2021, Netflix lost the rights to air older shows that have always been a big draw for streaming – shows like “The Office,” “Parks and Recreation” and most of the content in the “Star Trek” franchise, among other old shows that have already left. This has been one of the major reasons that Netflix has, according to Indiewire, spent $17 billion in 2021 for new content. Can such rampant spending compete with the recognizable IPs that have made rivals like Disney Plus, which has fresh Star Wars and Marvel content, such a big draw?
One other factor for the losses may be password sharing. According to CNBC.com, Netflix plans to combat this trend by adding fees for accounts where passwords are suspected of being shared with people outside the household. According to this report, Netflix will go after obvious abusers rather than customers that use the service while away from home. Another factor for people turning away from Netflix has been recent price increases at the end of March 2022, with some plans costing more than $15.
With all of this, it’s important to note that Netflix isn’t in danger of imminent collapse. It is still the number one streaming service (possibly due to it being the first service of its kind) and has made nearly $8 billion in revenue in the first quarter of 2022. Moving forward, the company will have to pare down its rampant spending on new content. The planned sequel to 2017’s Bright was an easy cost-saving cut for the company to place on the chopping block since its star Will Smith’s troubles last month were also a factor in canceling the project. Still, the company will have to be more frugal to maintain stability, particularly in an economy where widespread inflation and ever-climbing gas hit middle-class families rather hard. Netflix has also emphasized gaining new subscribers by producing new shows and canceling many shows by the third or fourth season. Examples of this are the Marvel Netflix shows like Daredevil and Punisher, which are now exclusively on Disney Plus. Perhaps it is time to return to the old broadcast network model of allowing a show to grow and improve over a much longer time.
In any case, the honeymoon that Netflix has enjoyed as the first name people think of for streaming should be considered something in the past. Moving forward, they might have to focus on innovating rather than spending. Netflix plans to offer 50 mobile games for subscribers by the end of the year. According to GameSpot, the company may have already started implementing this new philosophy.
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