The American service expects to lose 2 million new subscribers in the coming weeks and is stepping up measures to stem its fall.
Nothing is going anymore in the realm of the big red N. Since the announcement of the loss of 200,000 Netflix subscribers last April, a first after ten years of uninterrupted growth, not a week has passed without new recovery measures being mentioned. The latest? A recent article in the “Hollywood Reporter” announces the end of the era of pharaonic author projects like “The Irishman”, by Martin Scorsese, and its 175 million dollar budget.
According to several internal sources, Netflix has indeed now decided to concentrate its forces on really popular projects, where the company is sure to recover its marbles.
We must first put things into perspective: the 200,000 subscribers lost during the first half of the year actually represent a trifle for the streaming giant, less than 0.1% of its total clientele. With 221.6 million subscribers, Netflix is still the undisputed leader of platforms. The problem is that during the semester in question, the firm had actually planned to win 2.5 million customers and that the backlash is therefore ultimately quite severe. It is partly explained by the leaders having chosen to suspend their service in Russia, and therefore to give up on 700,000 households, but also by the end of two years of confinement which had boosted subscriptions, as well as by the rise of competitors, Disney+ and Amazon Prime Video in the lead, each with just over 200 million subscribers.
50 billion dollars vanished
More worryingly, the platform expects for the second half of the year the departure of 2 million additional subscribers. Knowing that the action had lost 35% of its value at the announcement of the first decline, last April, thus seeing the equivalent of nearly 50 billion dollars in capitalization evaporate, heads may start to roll in the offices. of Los Gatos.
“It’s been a while since I see the decline of the platform taking shape, analyzes Anthony Jerjen, Geneva filmmaker and producer who directed the American thriller “Inherit the Viper” in 2018. I even see it disappearing within ten years. The problem with Netflix is that users are its only source of income and the company finds itself facing competitors – Apple, Amazon and Disney – for whom the video market represents only a minority of their revenue. business, between their high-tech products, their delivery service and their amusement parks. The market is limited and Netflix knows it. So what are they left with? Further increase the price of subscriptions? Rather, I feel like they’ve already reached the maximum psychological threshold of what people are willing to spend on a streaming service and they’ve hit a dead end.”
Exit, auteur films
To try to revive its growth, the SVOD service would explore several avenues. First there was the dismissal of part of its workforce: about 150 employees, or 2%. A ridiculous measure, mainly intended to reassure shareholders, but interesting insofar as it seems to apply to very specific departments, if we are to believe the article in the “Hollywood Reporter”. In this case those of youth and independent films, which have both seen many of their projects frozen. A few months ago, however, Netflix was still hailed as the savior of low-budget films, a niche to which Hollywood had ended up turning its back, because it was not profitable enough. However, Netflix would now make a 180° turn to turn exclusively to spectacular productions, like the recent “Red Notice” or “Don’t Look Up”.
“It’s not so surprising, retorts Anthony Jerjen. Netflix has always relied on its analysis algorithms and these must have meant to them that subscribers were not so fond of these kinds of programs. The company has never hidden its desire to compete with the big Hollywood studios and I am convinced that apart from the series, we will soon find only big prestigious films there.
Advertising to bail out the coffers
Another track considered by the American giant: advertising. A system that Reed Hastings had always opposed for its platform. But that was before the disappointment of last April. Since then, the CEO has been forced to put water in his wine and now promises the arrival of a cheaper subscription, but including advertising breaks in the programs, within one or two years. An announcement made just a few months after that of Disney + stipulating the next implementation of a similar system.
“Personally, I don’t think this offer will attract many additional subscribers,” continues Anthony Jerjen. Why pay and advertise? Originally, the fact of paying was precisely to get rid of advertising… Disney can afford it because its catalog brings together the most famous films in the world. But this is not the case with Netflix.
Besides that, the streamer has also decided to settle once and for all the problem of sharing illicit accounts, estimating at nearly 100 million the number of households watching its programs without paying. The firm is thus testing a new pricing policy in 3 small Latin American markets: Peru, Costa Rica and Chile. Each time the streaming giant spots a shared account, it contacts the subscriber offering to pay an additional cost of around 3 fr. per additional household. According to analyst Paul Erickson, who confided in the media “Rest of the World”, Netflix would have “deliberately targeted small markets for fear of suffering a significant loss of subscribers in the face of these new measures”. We should soon know if they believe that this tightening of screws can save them money or lose it.
Diversify at all costs
But today, the Los Gatos group will above all have to change its business model if it wants to get out of the rut. It is also with this in mind that the platform began to move towards video games, a few months ago, by offering small mobile games in their basic subscription. But lately, Netflix has solicited some of its subscribers by asking them about their habits in terms of home consoles, co-op games with friends, or the presence of any “in-game” advertisements. We would therefore not be surprised if the firm seeks to implement itself more seriously in this niche with more ambitious games, this time accessible on PS5, Xbox or directly on certain televisions.
“Netflix must diversify, it’s obvious, continues Anthony Jerjen. It remains to be seen in which area. Video games? There are so many big players in the business that I don’t see how they could win against them. I see them rather, eventually, selling part of their catalog, and perhaps specializing in a very specific niche, such as the Mubi platform which streams auteur films.
So is Netflix really doomed to die slowly? Anyway, we’re not there yet. For the time being, the company has again announced that it wants to spend 20 billion dollars this year in terms of content to continue its crazy race forward: trying to attract new subscribers while keeping current ones warm. A mission that seems more and more impossible.