Kront 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. He positioned himself as anti-television that doesn’t force its customers into a rigid programming corset, doesn’t expect them to advertise, and releases entire seasons of series at once instead of every week.
With a similar aggressiveness, he threw himself into the film business and thus conveyed the message to his subscribers that they no longer had to go to the cinema for new titles. Its success attracted imitators, including established entertainment giants like Disney, where developing its own streaming services became a top priority, as well as outsiders like Apple. A content arms race ensued, giving audiences more and more choice.
But now Netflix shows unusual weaknesses. After more than a decade of steady growth, subscriber numbers have fallen for two straight quarters. The now reported minus for the past three months was lower than feared, but that is small consolation. Traditional Hollywood competitors should find some satisfaction in the stumbling of the upstart, who has been a thorn in their side for years. But it must worry her too. It raises doubts as to whether the calculations of many companies to also seek their salvation in streaming will pay off financially. And also raises the question of whether the golden age that has often been talked about in the industry is coming to an end.
price increases more difficult
In the past few months, Netflix has had to admit that it made a miscalculation. When business cooled off after a boost at the beginning of the pandemic, it was initially only assumed that this was a one-off effect rather than deeper causes. After all, the influx of subscribers in the midst of the first lockdowns couldn’t always go on like this. But now it’s dawning on Netflix that other factors are at play. Some, like the withdrawal from Russia or inflation, have to do with the world situation. But for the first time, the company also admits that it is suffering from increased competition. This is certainly a grudging commitment, 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 series hits like “Stranger Things” or “Bridgerton”. 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 criticized for over-emphasizing class and releasing too much mediocre material.
The consequence: subscribers cancel and are less willing than before to accept price increases. How much the company feels under pressure can be seen from the notable changes in strategy. It wants to offer a cheaper subscription with ads, which it previously explicitly rejected. It’s also moving somewhat away from releasing series in their entirety, with recent seasons of Stranger Things and Ozark coming in two staggered packages. In a way, it’s getting closer to the old habits of the industry that it has always distanced itself from.
Netflix is in a difficult balancing act today. Slowed growth is forcing the video service to cut corners, but it also has to continually deliver new audience hits and invest accordingly. The pressure is particularly high because, unlike most of its competitors, it does not have a diversified business model. Its financial success depends directly on paying subscribers. Entertainment companies like Disney and especially tech giants like Apple and Amazon have more sources of income.
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 a more critical questioning of how profitable the business can actually be. Even Disney, the most successful Netflix challenger to date, has been making 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.
