Netflix's Chill Is Now 'Disastrous'

'There's more to entertainment than volume and distraction'
By Arden Dier,  Newser Staff
Posted Apr 21, 2022 9:17 AM CDT
Netflix's Fall Triggers Shockwaves in Streaming
An advertisement for Netflix's popular show "Bridgerton" is seen outside its office building in Los Angeles on Wednesday.   (AP Photo/Jae C. Hong)

The streaming industry is feeling shockwaves after Netflix stunned analysts Tuesday in reporting its first loss of subscribers in more than a decade. Shares fell 35% Wednesday, wiping out $50 billion in market capitalization, following a 40% year-to-date drop. "Simply put, Netflix's terrible 2022 has now become disastrous," per CNN. More:

  • More losses coming: The company lost 200,000 of 221 million global subscribers in the first quarter when it had expected to add 2.5 million. Even that expectation had worried investors, which should give some indication of the shock the streaming industry has received. And Netflix expects to lose another 2 million users in this quarter.

  • Investors spooked: It's enough to scare billionaire investor William Ackman, whose Pershing Square hedge fund acquired 3.1 million shares of Netflix in January. It sold its stake Wednesday, for a loss of $400 million, the Wall Street Journal reports. The fund has "lost confidence in our ability to predict the company’s future prospects," Ackman says.
  • Shockwaves: Some are now questioning streaming as a business model, which more traditional media companies are moving toward. "No matter what, it looks far less profitable, and that's a problem for everybody," analyst Rich Greenfield tells the New York Times. Shares in Disney, Roku, and HBO Max parent company Warner Bros. Discovery were all down Wednesday morning.
  • Why?: In a letter to investors, Netflix attributes the subscriber drop to increased competition, password sharing, "sluggish economic growth, increasing inflation, geopolitical events such as Russia's invasion of Ukraine and some continued disruption from Covid," per CNN. One strategy to boost growth is to monetize the sharing of passwords.

  • Cost of password sharing: But that could backfire, according to media analyst Michael Nathanson, who points to an exodus of subscribers after Netflix raised prices in January, per CNN. The outlet notes customers are "already strapped for cash because of the economy" and have plenty of alternative streaming options.
  • Advertising: Though co-CEO Reed Hastings once vowed there would never be ads on Netflix, the company is also looking to add lower-priced subscriptions plans with ads within the next year or two. "We've been thinking about that for a couple of years, but when we were growing fast it wasn’t a high priority to work on," Hastings says, per the Times. "Now, we're working super hard on it."

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  • Less content spending: Analysts say that will only work if Netflix can draw viewers in. "For every single title on the Netflix catalog, the demand is pretty much flat," while "the catalog for HBO Max and Disney+ is growing double digits," Alejandro Rojas of research firm Parrot Analytics tells the Times. But Netflix will now pull back on content spending over the next two years, per the Hollywood Reporter, even as popular shows like Ozark, Stranger Things, and The Crown are nearing an end.
  • Silver lining: That could actually mean better TV, according to Washington Post columnist Alyssa Rosenberg. "A lot of what's being released seems more like a laundry-folding accompaniment than ambitious art," she writes. Streaming services should realize now that "there's more to entertainment than volume and distraction."
(More Netflix stories.)

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