In the age of the streaming wars, the news that Netflix suffered its first loss of subscribers in a decade has raised questions about what’s next for the company and other market players.
HuffPost reviewed Netflix’s response and spoke to industry experts to answer some of these questions.
Why did Netflix lose subscribers?
Netflix, which is still the biggest player in the industry – at least for now – with nearly 222 million subscribers, attributed the drop in subscriber numbers in part to Russia’s war in Ukraine, the company having suspended its service in Russia and gradually closing all Russians. paid subscriptions.
How is the company responding?
In an effort to cut its losses, the company announced it would roll out a cheaper, ad-supported version of its service, a move CEO Reed Hastings has long resisted, and will also crack down on password sharing. , as the company estimates that 100 million households worldwide have taken advantage of the service.
“Those who have followed Netflix will know that I have been against the complexity of advertising and a huge fan of the simplicity of subscription,” Hastings said in a first-quarter earnings interview. “But as much as I’m a fan of that, I’m a bigger fan of consumer choice. And allowing lower-priced, ad-tolerant consumers to get what they want makes perfect sense. »
Hastings said the company hopes to add the plan within the next two years.
What is the challenge for Netflix in the future?
George Geis, a professor at the UCLA Anderson School of Management, said people in the industry used to say Netflix was a guaranteed winner.
However, “Netflix is having some difficulty figuring out how to add additional media to its traditional content streaming,” Geis told HuffPost. “And it’s not going to be easy.”
He added that Netflix will have to see if the steps it has already announced, along with an in-game push, will be enough to turn the company around.
Another area the streaming service could expand into is live sports. When asked if the company is also into sports, Ted Sarandos, co-CEO of Netflix, said management was unsure adding that the offering would contribute significantly to Netflix’s earnings. the company.
“I’m not saying we would never play sports, but we should see a way to develop a big revenue stream and a big profit stream,” Sarandos said on the earnings call.
The company instead focuses on “adjacent sports programming”, such as “Formula 1: Drive To Survive” and other sports documentaries.
Geis also said Netflix should overcome the churn many markets are experiencing in the United States and become more disciplined on spending going forward.
“Somehow he has to get a must-have program on a regular basis, if he’s going to stop this rolling, and somehow he has to do it in a way that doesn’t allocate $20 billion a year to programming costs,” Geis said.
Still, Geis warned, Netflix faces an existential threat.
“I think Netflix is in a battle right now for its life, especially its precious life,” he said. “It really is a serious battle.”
What does this mean for other streaming services?
When asked if other companies with a streaming deal should be worried about the Netflix news, Jim Milio, an executive producer who’s been in the film and TV industry for 40 years, replied: “It depends on how diversified they are.”
“When you watch Netflix, it’s really just a streamer,” Milio told HuffPost. “They haven’t diversified. They did not buy other companies. They don’t really have a whole lot to fall back on other than the subscription base.
That means companies like Disney, Amazon, and Apple, which have other businesses besides their streaming platform, might be in a better position.
“I think the big lesson here is that streaming isn’t the ultimate solution,” Geis said.
“Streaming is a fascinating market, but it’s not going to be one that can sustain businesses,” he continued.
What’s next for the streaming industry?
As consumers, we have a plethora of options when it comes to streaming platforms. Milio doesn’t think they will all survive.
“Some will fall, some will merge, some will be acquired. And some, like Quibi, will go bankrupt,” Milio said.
Quibi, a streaming service designed to deliver short videos on smartphones, shut down six months after launching after raising $1.75 billion.
CNN+, a subscription service launched in late March, confirmed on Thursday that it will close on April 30. CNN’s former parent company, Warner Media, merged with Discovery just weeks after the launch of the service, which reportedly has around 150,000 subscribers. David Zaslaz, CEO of the new Warner Bros. Discovery said it wanted to consolidate all of the company’s brands under one streaming service and was annoyed that CNN+ launched shortly before the merger, according to Variety.
Fox News, which also launched a streaming service called “Fox Nation” in 2018, has yet to release its subscriber count.