In the Trump era, the Justice Department blocked AT&T’s acquisition of Time Warner to protect rival streaming platforms. Courts ruled in favor of AT&T, but the telecoms giant backed out of the deal under pressure from investors who saw streaming as a costly distraction. A symptom that the item could be in a breaking point with Netflix’s publicized stumble in its stock decline, shedding new light on the limits of the subscription economy in entertainment.
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If Netflix’s current problems turn out to be a broader indicator of the growth slowdown of the sector (Amazon Prime Video and Paramount both suffered devaluations on Wall Street), that stumble can turn into a fall. Netflix’s stock price, trading above $500 a year ago, has fallen below $190.
The trigger was loss of 200,000 subscribers in the first quarter of the year, the first decline in a decade. The company had said it expected to add two million viewers in that period (it tops 220 million worldwide), with more cancellations expected in the second quarter today, which may mark a turning tide in streaming.
The Covid quarantine boosted subscriptions on all streaming platforms in 2020. But now without the lockdown, people watch less TV. Y inflation is also affecting family budgets, making people more selective about subscriptions. Finally, Netflix’s strategy of developing original content for niche audiences is, on the other hand, too costly to continue driving growth.
At par
like netflix, Amazon also reported its first loss quarterly since 2015. And although it has nothing to do with its streaming platform Prime Video or Twitch (it is due to its investment in an emerging electric vehicle company), analysts agree that it may put its content production scheme at risk: Amazon reported a loss of $3.84 billion, or $7.56 per share, when Wall Street analysts had expected a profit of $8.35. “What happened to Amazon is a fixable problem,” said financial specialist Bethany McLean.
“But Netflix has spent an enormous amount of cash, and faces equally incredible competition, both from TV studios that started their own broadcast business, as well as from other streaming subscriptions. And there it is not clear how they are going to get out of this, ”she added. Among those competitors is the former Viacom, now Paramount Global, which also posted losses “due to the company’s investments in content and declines in its traditional business,” McLean explained.
One more
The owner of CBS, Showtime, Nickelodeon, and the local phone, explained that first-quarter revenue fell 1% to $7.32 billion, compared with $7.41 billion in the same period a year earlier. And Paramount’s net profit fell to $433 million, compared with $911 million in the same period a year earlier.
In a statement, the CEO of Paramount Global, Bob Bakish, highlighted the company’s broadcast efforts (a positive segment among the conglomerate’s divisions), where revenues increased 82%, and Paramount+ broadband subscribers increased by 6.8 million. “Our strategy is working and our execution is solid“, Held.
paramount noted that global streaming subscribers rose to more than 62 million, but noted that subscribers to services other than Paramount+ declined. Another setback for the segment, which the company hopes to be able to compensate for among its units, and with leading content such as the series “Halo”.
Competition
A decade ago, Netflix had the streaming monopoly. But the new streaming platforms — Paramount+, Disney+, Apple, Amazon Prime Video and HBO Max — have become more competitive, in part by charging less, and by owning exclusive rights to classic shows and movies. And few markets are as competitive as streaming. Disney+ launches this year in the Middle East, and claims to have close to 200 million subscribers worldwide: very close to the leader Netflix.
Other competitors, such as AppleTV+ and Amazon, offer additional perks to subscribers, which may persuade customers to stick with them even if the programming isn’t perceived as complete as Netflix. Finally, some platforms have a strong hook in sport, where Netflix has not gained a foothold: StarzPlay has been building its portfolio of live sports; and the same goes for Star+ (from Disney), which has content from ESPN.
For a company that built its reputation on innovation and difference, Netflix seems lagging. According to its executive director, Reed Hastings, the proposal “is starting to look a lot like the cable and satellite model that we beat a few years ago.” A relaunch is needed.
Crisis
Every month, text messages announcing another subscription charge will come as a reminder to ask the user if they have extracted value from that subscription or not. And the rising cost of living in many parts of the world is leading to a rationalization of spending by customers.
In that line, many users mark that the netflix catalog is not interesting enough, despite the success of some outstanding series such as “The Squid Game”, “The Tinder Swindler” or “Lady’s Gambit”. And Netflix’s big bet to produce films nominated for the Oscars is halfway: it has not yet won the grand prize, losing to its rival AppleTV + with Coda this year.
No one can deny that Netflix changed the rules of entertainment, opening up a world of possibilities for subscribers. But those advantages have faded. Households with multiple subscriptions lose at least one of the services they are subscribed to, and the original Netflix may be left out of the conversation for the first time.
layoffs
At the end of April, Netflix He sent dismissal telegrams to a large number of employees who were involved in his Tudum platform, a site designed to promote his own shows.
“Netflix’s intriguing editorial strategy to hire some of the best minds in entertainment and culture, very specifically to woo a bunch of non white women. And just a few months later…damn,” journalist Katy Way wrote on Twitter after being cut off.
“Netflix recruited me seven months ago just to say goodbye me and a lot of other talented people today”, seconded the journalist Evette Dionne, another of the farewells, along with Sara David and Reina Sultan, who tweeted about it and left their resumes.
And the cutout is apparently part of a wider restructuring of the company’s marketing department, according to Bloomberg. Netflix’s Asian strategy has yielded results with Korean content at the forefront, but it is losing ground in the US, Europe and Latin America, which prioritize platforms with fewer titles on offer, but higher quality.
Horizon
Netflix had in 2021 the biggest program in its history in hours of global viewing: “the squid game”. But it did not retain audiences, they point out from Parrot Analytics.
“Stranger Things” on Netflix, “The Mandalorian” on Disney + and “Titans” on HBO Max, in return were the original programs that more subscribers pulled: The alliance with DC Comics proved to be essential for HBO Max. And in the same way, Disney + bets on its Star Wars content: in days the ObiWan series with Ewan McGregor will arrive. “Ted Lasso” has been the hook for Apple TV +, and “Only Murders in the Building” for Star + in Latin America.
But Amazon Prime promises to be the surprise: They will add “The Rings of Power” (about Tolkien’s saga), and adaptations of video games such as “Fallout”, “God of War” and “Mass Effect”, to compete with Paramount +’s “Halo”. And HBO Max reserves the prequel to “Game of Throne” for a second semester that guarantees a fierce fight, and where Netflix appears without titles of that caliber and with “Cobra Kai” as a pearl.
by RN
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