On Tuesday, the media industry, especially those involved in streaming, heaved a great sigh of relief.
That's because 970,000 customers were lost, according to Netflix's second-quarter earnings report. The company has lost the most subscribers in its 25-year existence, and while that amount is significant, it is also less than half the 2-million subscriber loss the company forecast in April, which stunned Wall Street and the streaming sector.
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In fact, a large portion of Netflix's Q2 report appeared to be an effort to reassure investors and the media industry that the company has learned from the news from April, when the company announced a 200,000 subscriber loss. This news caused their stock to plunge 37 percent in a day, resulting in multiple rounds of layoffs and budget cuts. The research even predicts a 1 million subscriber increase in the third quarter, which is a small bit of positive news.
In a sense, Netflix suffered the worst public blow in April; this report follows up with a rosier-than-anticipated subscriber loss and specifics on a range of initiatives targeted at increasing member counts and generating new revenue.
The business acknowledged, for instance, that it is working with Microsoft to create a new, more affordable membership tier that would incorporate adverts in its content. They intend to introduce the service in a few cities with significant advertising economies—possibly New York and Los Angeles? —planned for early 2023. After years of opposition, Netflix is now allowing adverts in its programming, possibly in awareness that some customers won't subscribe until they have this choice.
As a result of password sharing, which it believes results in approximately 100 million homes using the service for free, Netflix is also experimenting with two alternative approaches to stop it. The paper describes two separate strategies that are currently being tested in Latin America; for fees averaging around $2.99 per month, members can "add a person" in one group of nations and "add a household" in another.
The article points out that Netflix has been attempting to change its service from a collection of programs with outside origins to a platform that is mostly driven by its own original content. According to their statement, they have completed the most "cash-intensive" stage of that shift, which suggests the days of programming budgets exceeding $15 billion may be coming to an end.
The success of Netflix is sometimes regarded as a leading indicator for the entire sector. The biggest streaming service still has 220.7 million subscribers. But its recent subscriber losses might serve as a wake-up call that prompts Wall Street investors to see Netflix and the streaming business more realistically.
When the disrupter becomes an institution
I've long believed that Netflix's success with investors was predicated on a pair of unlikely assumptions: that it could consistently grow its subscriber base every quarter and continue investing huge sums of money in programming. Customers who are concerned about rising costs and more competition from other streamers force the streamer to reevaluate concepts it had previously dismissed out of hand.
When a disruptor becomes an established institution, concepts that were once radical reinventions become traditions that may need to be themselves subverted.
In light of that, here are some further suggestions that Netflix should reevaluate:
It's necessary to change the binge-watching model. The research extols the virtues of Stranger Things, which in its fourth season became the biggest English-language TV hit ever with 1.3 billion hours of viewing. The most current season of the show debuted in two parts, which made sure that viewers stayed interested in it for several weeks and kept episodes in the streamer's Top 10 for a long time, which is something the report neglects to mention.
Even though some viewers might like having access to every episode of a season at once, it appears better for many series to spread out the episode releases. This allows discussion about strong shows to develop and gives potential viewers more time to find a show.
Netflix shows frequently drag on for much too long. Since the streamer's disastrous foray into Marvel programming, I've been saying that too many
Netflix projects feel like movie ideas stretched out into multi-episode series, with narratives that falter in the middle of the season as producers scramble to fit in all the episodes. The Marvel shows on Disney+ like Loki, Hawkeye, and Ms. Marvel, which all delivered seasons with six episodes and were packed with material, are better examples to follow.
Netflix's TV-quality disadvantage is escalating. Despite receiving numerous Emmy nominations this year for shows like Stranger Things, Squid Game, and Ozark, the service was surpassed by HBO and now faces competition from Hulu and Apple TV+. A particular subset of the subscriber base will be impacted by the fact that it isn't producing the same number of award-winning prestige shows as it formerly did, such as House of Cards, Orange is the New Black, or The Queen's Gambit.
Before addressing password sharing, Netflix needs to earn the trust of its audience. It will be difficult to convince customers to pay extra to share passwords with others, therefore forcing them to pay for a service they have been receiving for free for a long time. They will do this while also striving to increase their user base by reducing "churn"—the amount of subscribers who discontinue using the service, often in order to switch to a rival.
When you claim your business is centered on choice and control for subscribers and those consumers opt to share passwords, unringing that bell is a big problem, regardless of how many tests they do in smaller regions.
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