🍿 REVIEWS News – Paris/France.
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The company has grown from online DVD rental to the measure of all things in the booming business of Streaming. But the competition is getting stronger. Recently, Netflix has been losing customers while rivals like Disney have made big gains. On the occasion of its 25th anniversary, on August 29, the market leader in Streaming is under pressure like never before. This is why Netflix is adopting new strategies and breaking with its traditions. For many users, this could soon have unpleasant consequences.
In the coming year, Netflix wants to start taking tougher action against customers who share their login data with others. The company assumes that, in addition to nearly 221 million regular subscribers recently, more than 100 million households use the service. Streaming without authorization. So far, Netflix has toed a loose line here, but that should now be over. But is it so easy to turn free riders into paying customers? “Netflix has to be careful not to scare off users,” says expert Simon Baker of financial firm Societe Generale. US surveys indicated a relatively high willingness to migrate.
After the boom in Streaming caused a surge of subscribers at the start of the pandemic, Netflix lost more than a million customers in the first half of 2022. Especially in the home market of North America, which is increasingly oversaturated given the many competing offers, many users have recently opted out. After years as a stock market darling, Netflix is now having a tough time on Wall Street as well: The stock has fallen almost 60% this year – far more than the market as a whole. And now, of all things, the competition begins.
Rival Disney+, which began as a Netflix hunter less than three years ago, gained around 14,4 million subscriptions in the three months to the end of June - thanks in large part to the 'Star Wars' series. "Obi-Wan Kenobi" – and is already there with a good 152 million user accounts. Add the other services of Streaming from Disney, Hulu and ESPN+, and the Hollywood giant is already roughly on par with Netflix. However, Disney has also helped a lot with discounts and specials in recent years. Moreover, the figures are only comparable to a limited extent, since Disney attracts many users with combined offers. It remains to be seen whether the Mickey Mouse group will be able to maintain its strong growth. Still, Netflix seems weak at the moment.
To get back on track, founder Reed Hastings even gave in to one of his biggest taboos. Given the weak evolution of the number of users, Netflix is launching a cheaper version of its Streaming with advertising clips. In fact, Hastings had always firmly rejected this. The advertising variant is expected to launch in 2023, initially in "a handful of markets". Will it bring the hoped-for momentum? “Subscription growth should initially benefit from the cheaper version with advertising,” says Barclays research. However, there is a risk that many old customers will switch to the new cheaper offer.
Netflix has already said goodbye to another brand. In the more recent seasons of “Stranger Things” and “Ozark,” for example, the online video service no longer streamed all episodes at once as usual. With this, Netflix is abandoning its tradition of providing the material for the binge-watching marathon of new series seasons. The calculation of the reform: keep customers longer – series fans can no longer watch everything at once and cancel their subscription. While it's common in the traditional TV industry to only air one episode a week, Netflix is breaking its longstanding standards.
After all, the company has a lot of experience adapting its business models – and has had a lot of success in the past too. Originally, Netflix was a DVD rental company. According to legend, the company's history began with a rental video. Founder Hastings misplaced a tape with the movie “Apollo 13” – annoying, because the video store racked up a $40 fee as a result, as he later said. On the way to the gym, Hastings saw the light: for $40 a month, you can train as much as you want. This gave rise to the idea of the Netflix subscription model: for a monthly fee, you can receive as many DVDs as you can handle in a month.
But unlike video library giant Blockbuster – which in 2000 rejected the takeover of Netflix for what today seems an almost ridiculously low price of $50 million – Hastings has recognized the signs of the times. DVDs haven't played a role for Netflix in years, since 2007 it's all been about the Streaming. As Blockbuster filed for bankruptcy in 2010, Netflix, the pioneer of online video services, became the terror of cable television. In the meantime, however, the empire strikes back – not only Disney, but also major US media groups Comcast, Paramount and Warner Bros. Discovery are fully committed to the Streaming. Tech giants Amazon, Apple and Google are also improving their services – it's getting harder and harder for Netflix.
Shares of Netflix temporarily fell 6,08% to $226,50 on NASDAQ on Monday.
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—By Hannes Breustedt and Andrej Sokolow, dpa—
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