NASDAQ title Netflix stock: Netflix with massive subscription loss – Is the streaming giant now stopping its binge-watching strategy?

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Netflix usually allows binge watching of new releases
Massive customer churn in the first quarter of 2022
Changing the publication model?

Netflix relaxes binge-watching model

The streaming provider Netflix has usually released new series directly as a complete season in order to give its customers the option of “binge watching”, i.e. watching several episodes of a series in one go. In recent years, however, the company has increasingly moved towards bringing squadrons to the platform in two separate parts.

Netflix is ​​also currently pursuing this strategy with the fourth season of the mystery series “Stranger Things”. Netflix’s popular in-house production will be released in two parts. The first part with seven episodes was released on May 27 and broke records according to “CNBC”: With almost 287 million viewer hours, it was the largest premiere weekend of an English-language program on the platform. The remaining two episodes will then land on the platform on July 1st.

Netflix is ​​losing subscribers for the first time in a decade

However, the latest quarterly figures from the streaming giant revealed the problem the group is currently facing. Not only did subscription growth at Netflix stagnate in the first quarter of 2022, the company even lost customers for the first time in ten years. With 221.6 million subscribers, the provider now has almost 200,000 fewer customers. While some of the attrition is explained by the departure of the Russian business in response to the war in Ukraine, which eliminated 700,000 accounts, even with the 500,000 new subscribers Netflix would have fallen well short of its targets. Accordingly, the group formulated its forecast for the second quarter as part of the balance sheet presentation and even assumes that 2.5 million customers will be leaving.

The competition never sleeps

In addition, more and more competitors are storming into the streaming market. After Netflix appeared as a DVD rental company in the first few years of business operations, the streaming business was added in 2007. At that point, the group held supremacy in the field. In the meantime, however, the rivals Amazon, Disney, Apple and Sky are also trying to catch customers. With AMC+ and Paramount+, two more competitors will soon be added.

Pandemic split equally popular with fans, according to Netflix

In order to get these problems under control and to keep customers over a longer period of time, the streaming provider could soon deviate from its binge strategy, according to CNBC. A first step in this direction has already been taken with the division of individual squadrons, which, however, was also justified with delays caused by the pandemic. “The splitting of the squadrons was actually for a practical reason, which is the delays with COVID and all these projects that kind of made us split up some of the squadrons,” co-CEO Ted Sarandos said in a statement to CNBC. “But we found that the fans like both.” A general deviation from the original strategy of releasing complete seasons at once is currently not recognizable, the television station continues. Instead, individual decisions should be made. So far, the company has also tested weekly broadcasts, but this has been limited to reality broadcasts. According to the group, subscribers value the possibility of having free options when watching series.

The previous release model encourages short-term subscription breaks

However, this freedom also poses a problem for Netflix, as Wedbush analyst Michael Pachter points out to CNBC. “With Netflix, it’s very easy to sign up for three to six months and then go back for three to six months,” the strategist said. “When ‘Stranger Things’ is over and ‘Ozark’ is over, what then?”

However, this shows that Netflix is ​​now in a completely different market environment, as pop culture professor Robert Thompson emphasizes. “When Netflix started, it really had the field to itself,” he said. “One of the reasons they started binging was to get people talking and really launch their new original programs. They succeeded. But now it’s a very different case.” More and more licenses for content from other studios are running out. Disney, for example, withdrew its films and series from the platform before the media group launched its own Disney+ streaming service. Therefore, Netflix is ​​now putting a stronger focus on in-house productions.

Inspiration from Disney, Amazon & Co.?

Competitors like Disney+, Hulu, and HBO Max are also already adopting the strategy of releasing one episode of a season per week, which aims to keep subscribers on the platform. Disney in particular retains customers with the option of renewing their subscription month by month or by ordering the annual package. In-house productions of the “Star Wars” and “Marvel” franchises also keep subscribers happy. “It’s absolutely fine to say, ‘We’re the disruptor, but there are things our competitors are doing that we admire and respect and that we believe are doing right,'” Pachter said. “That is no excuse.” So if Netflix doesn’t want to adopt Disney+’s weekly publication rhythm, picking it up from Amazon is also conceivable. The mail-order company brings out three new episodes a week for some of its own productions.

quality instead of quantity

So while competing services with expanded publishing strategies keep customers content year-round, Netflix needs to backhaul far more of its own productions to give its subscribers a similar feel, Pachter told the US broadcaster. “Netflix’s data volume means they need to produce more content to minimize churn,” the strategist said. “I think they will be much more successful if they focus on more quality than more quantity.” This is also the opinion of Peter Csathy from the consulting firm Creative Media. “Instead of throwing all the titles on the wall to see what sticks with consumers, focus on franchises and well-known brands,” the founder and chairman told CNBC. “The smartest bets are those that have high profile and a steady audience.”

Strategy change ahead?

It is not yet known whether Netflix will actually change its publication model. However, media and streaming analyst Dan Rayburn thinks this is unlikely. “I think people forget in our industry that there is no one size fits all,” the expert told CNBC. “I don’t think Netflix will say binge watching will stop.” The streaming provider is more likely to add other distribution plans, such as an ad-supported subscription that co-CEO Reed Hastings recently announced.

According to Csathy, however, one shouldn’t jump to conclusions about Netflix’s course of action. The company is always good for surprises: “With Netflix or other providers, the following applies: never say never,” the Creative Media boss told the broadcaster. “Just like they said ‘no way, no ads,’ don’t assume binge viewing is forever.”

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