Netflix is struggling but will it ‘Bend the Knee’ to Disney? – Game of Streams part 3
Streaming companies saw a steady rise in subscriptions throughout the Covid-19 pandemic. With more people housebound due to a combination of both governments enforced lockdowns and apprehension to socialise outdoors many turned to streaming services to occupy their time indoors.
Fast forward to today and with restrictions eased, more people trying to get a semblance of normality back in their lives by venturing outside of the home again and rising inflation putting a strain on disposable incomes the future of streaming isn’t viewed as optimistically as it was only a year ago. So, in this article I shall be primarily looking at Netflix, its woes and what it may mean for streaming services now and in the future.
Netflix is the largest streaming platform having ended 2021 with over 220 million global paid subscribers. Netflix increased its output during the year spending more on content, enlisting A-List stars like Dwayne ‘The Rock’ Johnson and Ryan Reynolds for exclusive films and having global series hits like ‘Squid Game’ to keep subscribers happy. Which is why news that Netflix lost 200,000 subscribers was met with dismay by those at the company.
Shareholders have been warned to expect up to two million more subscribers to leave in the three months to July. Since the beginning of April Netflix’s share price has dropped 50% and there is concern in the industry as to what the impact this seismic shock will have on other streaming services.
So, what is the reason for this downturn in fortunes? There are a number of factors as to why: global inflation is putting a squeeze on household incomes. With most people getting real terms pay cut due to the cost of living rising faster than wage increases people are being left with tough choices as to which extracurricular activities they can afford and the escapism and entertainment of maintaining subscriptions to streaming services need to be weighed against an increase in energy and food prices.
Some say that Netflix are cancelling shows too quickly with some gaining popular followings only to not get renewed with it revealed that over half of Netflix’s own reality TV shows and dramas released in 2018 were not commissioned for a second series leaving some thinking what is the point in investing in a series if it will just get cancelled after one season? Elon Musk recently tweeted ‘the woke mind virus is making Netflix unwatchable’ which is an opinion echoed by some who believe their programming is becoming overbearingly ‘liberal’ and ‘agenda driven’.
One of the most attractive things about the Netflix model is it propensity to release entire series all at once giving the viewer the opportunity to ‘binge watch’ a series rather than wait for episodes to release on a weekly basis. Although having that choice is good for the consumer it’s not good for Netflix’s bottom line with viewers having the option to cancel their subscriptions after quickly watching a series of interest within a few days and not needing to prolong their financial commitment for the 3 months it would take to finish watching a twelve-episode series which released one episode a week for example.
So, what is the answer? Netflix has already begun cutting costs by laying off staff and halting production of some series. Their original animation department has been particularly hard hit with a number of Executives let go and anticipated animations including ‘Bone’ and Roald Dahl’s ‘The Twits’ being cancelled completely. Netflix Execs have spoken of limiting the widely used practice of ‘password sharing’ where people often use the profiles of family members or friends to watch Netflix instead of taking out their own subscription.
See what Netflix has planned for 2022 here
It is estimated that about 10 million households are watching Netflix for free via password sharing. Netflix are currently testing ways of curbing this practice in Chile, Costa Rica and Peru and could extend this globally if it is successful in limiting the practice.
Another unpopular suggestion has been to consider opening Netflix to advertising revenue by having paid for advertisements included in the Netflix experience, a suggestion that has been met with disdain from a number of current subscribers who do not want their viewing experience interrupted in such a way.
Another development to keep an eye on in the streaming world for those based in the UK is the news that streaming services are to be regulated by the UK communication’s regulator OFCOM in the near future bringing them in line with traditional broadcasters in a move that the UK Culture Secretary has said would protect audiences from harmful material. Currently streaming services are not subject to the regulator’s Broadcasting Code meaning that they can operate outside of its confines but once this is passed streaming services will need to ‘protect audiences from harmful or offensive material’ and adhere to rules regarding ‘accuracy, fairness and privacy’.
This is new territory for streaming services and could mean changes to what is shown in the UK to make sure that they do not fall foul of these regulations that they are bound by meaning some content may potentially be edited for viewers in the UK. The fine for breaking the rules. A hefty £250,000 or an amount up to 5% of an organisation’s revenue, whichever is higher should see strict compliance.
So, whilst the future is uncertain it is clear that, due to the competitive nature of streaming and the number of different options available to consumers that investment in quality programming is necessary to keep subscribers and entice new ones.
Lost in the furore of the slap heard and seen around the world Apple TV+ distributed CODA made history by becoming the first film distributed by a streaming service to win the Best Picture Oscar at the 94th Academy Awards, bringing a whole new level of legitimacy to the streaming industry whose films are often seen as inferior to their theatrically released counterparts.
Disney Plus still has a full slate of their original programming coming for the rest of 2022 and are currently airing the well-received Moon Knight. Amazon Prime’s popular adult comic book series The Boys returns for its third series in June. Despite the aforementioned troubles at Netflix and an indication to show more fiscal responsibility its critically acclaimed show Stranger Things returns for its fourth season in May with each episode reported to have cost $30m to make putting the total cost of the nine-episode season at a mammoth $270m proving that Netflix are indeed willing to invest in their premium content even if cutbacks are made in other areas.
These are highlights but there are a host of highly anticipated streaming show and film releases slated to drop this year across multiple services. All of this is good news for us viewers, but many questions still remain as to the viability of the industry in both the short and long-term. Watch this space.