The Tribune

By CHRIS ILLING

Business Developer

ActivTrades Corp

www.activtrades.bs

Almost no other company has shaped the world of film and television in recent years like Netflix. The video service has shaken the balance of power in Hollywood. It positioned itself as anti-television that does not force its customers into a rigid program, does not expect them to advertise, and releases whole seasons of series at once instead of every week.

With similar aggression, Netflix threw itself into the film business and thus conveyed the message to its subscribers that they no longer had to go to the cinema for new titles. Its success attracted imitators, including established entertainment giants such as Disney, while Warner Brothers were developing their own streaming services as well as outsiders such as Apple and Amazon.

When Netflix’s stock seemed to know no bounds to user growth, the company’s valuation did not matter. But now investors are looking much more at the metrics. After more than a decade of steady growth, subscriber numbers have fallen for two straight quarters. The video streaming service lost less than half as many subscribers in the past quarter as management had predicted earlier this year. This somehow positive news encouraged investors and the shares rose by around 10 percent last week.

Yet the positive surprise in the quarterly figures for Netflix shares is not enough to improve the loss balance of minus roughly 71 percent since the record high in autumn 2021. The numbers also raise the question of whether the golden age that has often been talked about in the industry is coming to an end.

Business cooled off after a boost at the beginning of the pandemic. It was initially suspected that this was a one-off effect rather than deeper causes. After all, the influx of subscribers during the first lockdowns could not always go on like this. But now it is dawning on Netflix that other factors are at play. The withdrawal from Russia and inflation are part of it. But, for the first time, the company also admits it is suffering from increased competition. This is certainly a grudging admission, because until recently it was demonstratively unconcerned when it came to the competition.

Netflix has long defined and dominated streaming. Many subscribers considered the video service indispensable; it tied them to itself with a steady stream of popular series. But the more competition pushed into the market, the more often shows with a “must see” character were found elsewhere. Netflix, on the other hand, has recently been criticised for over-emphasising class and releasing too much mediocre material.

The consequence is that subscribers cancel and are less willing than before to accept price increases. Now the streaming pioneer changes its strategy. Netflix wants to launch an advertising-financed, cheaper subscription. It is also moving somewhat away from releasing series in their entirety. It is getting closer to the old habits of the industry that it has always distanced itself from.

But sobriety is also spreading beyond Netflix. After the euphoria of the past few years, when new streaming services were just throwing money around, there is now more critical questioning of how profitable the business can be.

Even Disney, the most successful Netflix challenger to date, has been suffering losses with its streaming services so far. Of the many providers that are bustling about in the market today, not all of them will be able to survive. Streaming will certainly continue to have a decisive impact on media consumption, but it is not a sure-fire success for companies.