For the first time in more than a decade, Netflix is on the defensive.
Although it still has more subscribers than any other streaming service (around 221 million at the start of the year), Netflix bosses revealed in the company's latest investor report that the platform has hemorrhaged 200.000 paying customers since the beginning. by 2022, a figure that is expected to reach 2 million by the end of June.
If the trend continues, analysts predict that Disney Plus will overtake Netflix in paid subscribers by 2024, leaving the streamer vulnerable to other platforms yet to go global (such as HBO Max and Paramount Plus) with vastly superior intellectual proprietary catalogs to choose from.
But what does Netflix's decline really mean for existing subscribers? The answers, it seems, are threefold, and any attempt by the streamer to stop the bleeding will cause no problems for the 221 million customers who keep it afloat.
A supplement for the participants
Let's rule out the bad news. For starters, Netflix will almost certainly start cracking down on account sharing.
In early 2022, the streamer introduced a pilot program that added an extra $2.99 (about $2.50 / AU$4) to Netflix accounts that share their passwords with family, friends, and freeloaders, plus the household that pays the bills.
In the company's recent investor report, which revealed that more than 100 million households worldwide are ignoring monthly subscription fees, Netflix bosses expressed a desire to double down on ambitions to keep the platform tidy, meaning that this pilot program is expected to take effect globally. in the very near future (currently it remains limited to Chile, Costa Rica and Peru).
According to Netflix, 33% more people could be paying for the service than are already, so if you're currently using someone else's login credentials to binge on Bridgerton season 2, you can expect a polite touch (or not so much). polite) over the shoulder very soon.
Of course, password sharing charges probably won't be limited to just Netflix. As Tammy Parker, Principal Technology Analyst at GlobalData, explained in a statement to TechRadar: “Password sharing is a threat in the streaming industry and it doesn't just affect Netflix. Any success by Netflix in stopping unauthorized password sharing will be closely monitored and potentially copied by every streaming player.
Netflix's need to deal with its recent subscriber losses could have a ripple effect on the rest of its subscriptions to the streaming service. As TechRadar US editor Lance Ulanoff says: the platform's password-sharing fees are just the tip of a costly iceberg.
Reorganization of subscriptions
Netflix's downward trajectory will almost certainly affect its business model for years to come as well. Business owners, for example, are finally starting to offer customers a cheaper ad-supported subscription tier, similar to those already offered on competing platforms like Hulu and HBO Max.
Following Netflix's quarterly investor report, CEO Reed Hastings revealed that the streaming service is now "open enough" to change its business model with the goal of generating revenue and creating the option of lower prices for subscribers. new and existing, although previously he was reluctant. do this.
“Those who have followed Netflix know that I am against the complexity of advertising and a big fan of the simplicity of subscriptions,” Hastings admitted. "But as much as I'm a fan of that, I'm a bigger fan of consumer choice and allowing consumers who want a lower price and tolerate advertising to get what they want makes a lot of sense."
HBO launched an ad-supported subscription tier on HBO Max last year, while Disney plans to introduce a similar plan on Disney Plus later in 2022. It's not yet clear how much Netflix's ad-supported subscription tier might cost, nor The parameters that, in addition to an affordable package, could be put on the availability of content, although HBO's model offers a useful marker of what customers can expect.
For $9.99 (about $8 / AU$14) per month, subscribers to the ad-supported version of HBO Max can access the same library of movies and TV shows as those on the standard tier, but without the ability to download content to view offline. . or stream it in higher quality at 1080p. So Netflix is likely to replicate this approach.
“It's pretty clear that he works for Hulu,” CEO Hastings told investors. “Disney did. HBO did it. I don't think we have much doubt that it works. All these companies got it, I'm sure we'll go in and understand instead and maybe that or not."
According to some industry insiders, such as Kai Henniges, CEO and co-founder of Video Intelligence, Netflix may be using the introduction of ads as an opportunity to redefine what users consider acceptable advertising.
"As Netflix approaches this new territory, it should continue to focus relentlessly on the user experience," Henniges told TechRadar. “For some, digital advertising is synonymous with flashy banner ads, irrelevant ad content, and irritating pop-ups, but Netflix is uniquely positioned to leverage new technology to ensure that ads not only deliver results benefits, but also satisfy consumers with a tailored experience and real value.
"If Netflix intelligently analyzes the meaning of its content—its themes, sectors, or style—it will be able to contextually tailor it to ad demand. Or, to put it simply, Netflix should look to run ads that are relevant to the show or the movie, during which they are shown.
But the introduction of an ad-supported subscription tier isn't the only business model change that could affect existing Netflix subscribers: the streamer could also launch several new subscription types in a bid to cater to specific consumer needs.
As GlobalData's Tammy Parker told TechRadar, “Netflix's pricing strategy needs to evolve, especially as inflation eats away at consumers' wallets, making them more selective about their streaming subscriptions. the plans are little differentiated, as they all offer the same content and vary only in terms of video quality and number of screens supported.
Therefore, in the near future, Netflix may offer its customers more freedom to choose the type of content they pay for. Could we see an option that gives subscribers exclusive access to original Netflix content, or just series instead of movies? It's certainly a possibility, and renewing your subscription packages in this way could make Netflix the market leader in a new form of personalized entertainment.
Bigger, better and longer lasting content.
While the big changes mentioned so far will put the ball in the consumer's court, Netflix is confident that content will be king when it comes to reversing its fortunes, which is great news for those frustrated with the TV library. increasingly reduced from the transmitter. and ruthless. cancel culture.
"Our plan is to once again accelerate our viewing and revenue growth by continuing to improve all aspects of Netflix, especially the quality of our programming and recommendations, which are what our members value most," the Hastings CEO told investors. after the news from the company. subscriber losses.
Given how much existing IP Disney Plus and HBO Max have at their disposal in 2022 (think franchises like Star Wars, Marvel, and Game of Thrones), Netflix faces an uphill battle to prove it can produce enough original content to guarantee the customer. attention.
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Mega-hits like Bridgerton, Squid Game, and Stranger Things are all great deals, but Netflix obviously can't rely on their ability to attract an audience that will stick around for the long haul. Like Apple TV Plus, whose recent projects CODA and Severance have shown the value of investing in truly unique original programming, the streamer must rely on its audience's willingness to embrace the unknown and give its new TV series time to Breathe before condemning her. in the scrap heap.
Improving "the quality of our programming and our recommendations" suggests Netflix bosses have, in part, recognized this fact, though the streamer's multibillion-dollar content spend should become more of an exercise in throwing money of late.
So the bottom line is that positive changes are coming at Netflix. These recent subscriber revelations may have shaken the stock market's confidence in the company's enduring value, but they will also serve as the necessary catalyst to ensure the platform remains the best streaming service for years to come.
Yes, Netflix will almost certainly start charging you for sharing account passwords, but for our money, you'll also have more control over what you pay to watch, and you can expect renewed interest in much higher-quality original content in the future. .