✔️ 2022-04-21 16:27:00 – Paris/France.
The unexpected shock that just hit Netflix could be the first act in a series of changes and new configurations in the entertainment industry. While all projections predicted a growth trend for this phase marked by the probable end of the pandemic, the giant of Streaming Instead, he had to acknowledge a significant loss in his overall subscriber count, the largest in a decade..
The worst thing is not that about 200 subscribers have given up the most famous "N" of the alphabet of the show biz, but rather that there is some risk among analysts and investors of a sustained decline in corporate earnings expectations for the coming years. In a single day, last Wednesday, Netflix's stock plunged 35%, and the collapse caused the company's stock market value to drop vertically and immediately: no less than $5,5 billion in losses. In the blink of an eye.
One would assume that this collapse would become an immediate benefit to other participants in what we have long called theto the "battle of Streaming" In a context of heightened and increasingly fierce competition, one could imagine that the pioneering name in the business could retreat in the face of the sustained advance of a more determined competition ready to apply new strategies to capture subscribers.
But the entertainment industry works differently for now. Netflix is not the only victim of the situation that is beginning to affect it. It continues to operate concurrently with the initial reference point of a matrix in which the rest of the participants are considered part of an integrated system. The Netflix crisis immediately dragged on the rest: shares of Paramount simultaneously fell 11%, those of new conglomerate Warner-Discovery 6% and those of Disney 4%.
Platforms operate in a highly volatile and highly competitive scenarioShuttre – Shutterstock
The red lights came on immediately. The same scenario that seemed to develop without limits, encouraged in the last two years by the increase in home consumption of all kinds of entertainment-related content, does not seem as promising as before. Earlier this year, mainstream Hollywood media believed In some $110 million, investment in original productions, shows and acquisitions by the world's seven largest companies that own Streaming : Netflix, Disney, Amazon, Warner, Paramount, Apple and Peacock.
Some observers stop at this pattern of increasingly strong competition as the fundamental explanation for the crisis that Netflix faces today. Others prefer to integrate this context with some intrinsic problems of the “N” which until now had not been perceived and which have come to light in the midst of the disastrous figures of recent days.
The first explanations that Netflix sketched out in front of its dumbfounded investors concerned the complicated situation that the world economy is going through, especially since the Russian invasion of Ukraine. The war factor was the first invoked, especially since Netflix lost some 700.000 subscribers on Russian territory in the conflict by interrupting, like other large Western companies, its activities in Russia in response to the aggression orchestrated by the government of Vladimir Putin. From this point of view, the announced departure of 200 subscribers which triggered the crisis should have gone completely unnoticed. It didn't happen that way.
Netflix clings to the image of a new global economic reality, determined by rising global inflation and much slower expansion projections in the development of new lines of smart TVs and broadband connections to homes. , as a mitigating factor in the new and uncertain situation it faces. But the allusion to external factors is not the only one. Company executives had to admit that they expected very little subscription growth this year and next due to a series of changes and new strategies. Thanks to them, a new period of growth could only be glimpsed in 2024.
Stranger Things, one of Netflix's most successful original titles is coming to an end NETFLIX
Those who follow these developments in detail wonder if increasingly restless investors will be prepared to wait that long. Netflix also had to acknowledge that the loss of subscribers doesn't end in the 200 it admitted to losing in recent times. Before the end of the year, the company itself estimates that there could be an even more sustained drop, estimated at around two million subscriptions.
There are two simultaneous ways that can help change the trend and regain lost trust, they say on Netflix. On the one hand, a complete change of strategy regarding the configuration of its business matrix. In recent days, for the first time in its history, the giant of Streaming (which is still the industry leader today, with 222 million subscribers worldwide) began evaluating the possibility of launching a cheaper subscription with unprecedented advertising aggregates.
Remember that the Streaming appeared to consumers around the world as a promising option that offered an outlet for those who wanted to enjoy movies and series at home without the constraints and interruptions derived from bundles with advertisements and promotions, typical of cable television and other traditional methods. This "premium" subscription mechanism without advertising limitation very quickly became the main factor in the expansion of platforms and led to significant and rapid changes in entertainment consumption habits.
But this development has had its price. Subscription prices continue to rise, especially in the First World (a subscriber in the UK, as The Guardian noted in recent hours, pays a third more today than two years ago for the same service ) so a service like this provided by Netflix is becoming increasingly out of reach for entire regions of the world. Very recent market research told Netflix that the alternative of a cheaper subscription, with advertising included, would be very well received in vast territories of Africa, Asia and Latin America. In the world, on the other hand, subscriptions to the platforms of Streaming Ad-supported businesses, identified by the acronym AVOD (Advertising Video On Demand), have experienced sustained growth in recent years.
A second dilemma that Netflix still can't solve is that of shared passwords, a fact that today leads some 100 million homes around the world to access this service practically free of charge. Initially, the company decided to assume this anomaly as a cost of its own expansion, but lately this situation has become unsustainable for the balance of its workforce and strategies.
Netflix CEO Reed Hastings recently said that it would take about a year to completely normalize the scenario and recoup the losses by monetizing those unpaid bills, but in the market, they recognize at the same time that potential subscribers who so far enjoy Netflix services for free (most of which are in the US and Canada) could migrate to other platforms, attracted by plans of subscription much more aggressive and advantageous.
Reed Hastings, during his last visit to ArgentinaNetflix
However, shared passwords aren't the biggest dilemma Netflix faces. It is its own operating logic that should be reviewed, in the opinion of several analysts and observers. In a market that now seems on the verge of saturation, some platforms have begun to explore alternatives in terms of content offerings, integrating more and more live sports programs (as in the case of Disney, through its ESPN brand) or real-time musical performances (the recent example of Lollapalooza broadcast in Argentina via Flow).
Faced with these novelties, the Netflix scheme retains the same characteristic of its beginnings. Its catalog is made up exclusively of series, films and documentaries of its own production or acquired from other companies. And what, in recent years, was its strength, the original content, today seems to show a setback. Some of the big hit series that have made the difference between Netflix and its competitors (Ozark, Black mirror, stranger things, La Couronne) are today in the elaboration of their last stages and those who have come to occupy this place (fiction such as Bridgerton to the many productions based on the formula of true crime) are not enough to support the trend with the same efficiency.
On the other hand, it is increasingly certain that the original films on the platform lose their appeal after an initial moment of strong repercussion and begin to go unnoticed inside. an abundant catalogue, complex to understand and visualize, in which it is often difficult to find productions that attract attention. And if the announced strategy of launching a cheaper alternative subscription plan with the incorporation of advertising elements were to be implemented, other analysts fear that this change will end up "lowering" the value of Netflix original content, shifting the interest of subscribers who wish to take advantage of a much more demanding content offer to other platforms.
Netflix has withdrawn from Russia and resigned about 700 subscribers thereNETFLIX
At this stage, a new phase could even emerge in the evolution of the functioning of the platforms of Streaming and the scenario of their next “battles”. Especially since more and more personalities (directors and actors) are joining this world. Announcements of new direct-destination productions on the platforms of Streaming far exceed those handled for theatrical release by major studios.
In this direction, more than one analyst began to wonder if the age of the binge-watching which was part of Netflix's identity and accompanied the colossal growth of the platform in recent years. Little by little, as they add original productions to their respective platforms, Disney, HBO and Apple have chosen to return to the formula of airing one episode per week of their main series instead of opting for the launch, at once, of complete seasons.
Today, many are beginning to notice that the binge-watching it can even be detrimental to your products. Marathons immediately erase the novelty created by the arrival of a new series and raise fears of falling into the spoilersthat habit of revealing or anticipating fundamental plot details that causes so much concern…
SOURCE: Reviews News
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