On April 20, streaming giant Netflix released its first-quarter 2022 earnings report.
The financial report shows that Netflix’s revenue in the first quarter was US$7.87 billion, a year-on-year increase of 9.8%; its net profit was US$1.6 billion, a year-on-year decline of 6.4%, both of which fell short of expectations.
More concerning than stagnant growth is the loss of subscribers: Netflix saw a net loss of 200,000 subscribers in the first quarter of 2022, and is expected to lose 2 million subscribers globally in the next quarter, the first time Netflix has faced negative subscriber growth since 2011 .
Netflix will suffer its first “cold winter” since its listing｜Data from Company reports
Affected by the performance of the financial report, as of after-hours trading on Tuesday, ET, Netflix’s stock price fell by more than 25%, and other streaming media stocks were also affected, triggering a strong shock in the stock market, which can be called an unprecedented change since its listing. There is widespread speculation that the reopening and active offline theater chains due to the gradual normalization of overseas epidemics will cause the streaming media industry to be in trouble.
Netflix’s internal and external problems
There is no harm without comparison, and the rise of Netflix is absolutely indispensable for the “full help” of cable service providers. Before the popularity of online streaming, cable TV almost contracted all the viewing experience of users and the viewing experience outside the theater.
Unbridled price hikes and near-forced bundling have all but become a consensus in the cable industry due to a lack of competition. Take Comcast, an American media and telecommunications giant, for example: a basic package priced at $30 per month has only 10 digital channels available for viewing, while standard and premium packages that include 140 and 220 digital channels cost $67 and more. At $70, the intent of the price is obvious. Netflix’s subscription fee starting at just $8.99 is obviously very attractive compared to the monthly price of dozens of dollars.
Unlimited viewing of all movies and variety shows for $8.99. Back then Netflix was simply a tens of billions of subsidies for the US streaming media industry.
On the other hand, Netflix relies on Hollywood’s steady stream of content output, and the online films and variety shows almost cover the aesthetic needs of audiences from all walks of life in American society. Netflix is well aware of the importance of localization for streaming media business, and has deployed a large number of global IP resources in the process of going overseas, and has made bold attempts to diversify original content.
Boldly embracing “Korean Wave”, the explosion of “Squid Game” proves that Netflix has a unique vision
Since the broadcast of “House of Cards”, Netflix has proven its ability to create “blockbusters” with a number of well-received series works, and its popularity has even set off a “pulling wire” craze in the United States, breaking the The monopoly of the cable industry is not an unsuccessful one; however, the streaming media industry today is much more turbulent than it was a decade ago, and Netflix’s recent poor performance also raises questions about whether the business model that once led to Netflix still has a long-term viability. operating conditions?
Single business model, aggravating industry involution
Netflix’s revenue comes from a stable user base and a high-quality content ecosystem. However, this business model is very easy to replicate in today’s Internet giants and media conglomerates. Internet giants have a huge user base and grasp the trend of online public opinion, so they have an advantage in the creation and publicity of original content; while media conglomerates have a large number of classic IPs and loyal fan groups, and may also hold The authorization of Netflix’s online content, once it enters the streaming media, may cause a double loss of Netflix content and users.
Affected by the epidemic, the streaming media industry will usher in a long-lost reshuffle in 2021. HBO Max and Disney+ came later: the former’s 2021 U.S. subscriber increase will reach 5.3 million, and the 1.3 million in the fourth quarter alone has exceeded Netflix’s total annual growth in the U.S.; while the latter relies on IP adaptation, with 16 months from Zero start completed a pioneering work of 118 million subscribers.
Although the start is unfavorable, HBO Max, which is backed by Warner Bros., can live very well even if it does not do original content
A more dramatic scene happened not long ago at the 94th Academy Awards. Apple TV+, which entered the streaming media at the latest, won the most successful Netflix hit for seven consecutive years with a small-cost inspirational film “The Listening Girl” (CODA). The Best Film Award, with an investment of less than 50 million US dollars, created the historical miracle that a streaming movie subverted the cinema for the first time.
‘The Listening Girl’ becomes the first streaming movie in Oscar history to win Best Picture, and Apple TV+ wins
More importantly, the capital invested by traditional giants in the streaming media industry is much higher than that of Netflix. The Walt Disney Group has allocated a budget of $33 billion in streaming media in 2022, almost twice that of Netflix. Ampere Analysis, a London-based research firm, predicts that the total spending of the streaming media industry will exceed $230 billion in 2022. The entire market has become an absolute red sea, and Netflix’s position is being challenged as capital from all parties continues to pour into the war.
The proliferation of shared accounts reduces user stickiness
Long-standing competition with other streaming platforms has led Netflix to unscrupulously. Netflix said in a shareholder letter that it admitted that it deliberately loosened the supervision of shared accounts outside the home, because shared accounts are easy to attract more potential users to watch TV shows and become addicted, and then start to subscribe to members, Netflix intends to maintain the growth momentum of the number of users.
Initially, the mechanism of shared accounts screened and converted a group of subscribers with clear payment intentions for Netflix, but for more potential users with ambiguous attitudes, the existence of shared accounts is undoubtedly a lower price to obtain the same viewing experience the best way. The subscription service of a Netflix main account can usually be shared by 5 sub-accounts. The number of such shared accounts in North America exceeds 30 million. If you look at the world, this number will grow to 100 million.
Everywhere the “free Netflix account” service provides a shared account
Netflix loses $9 billion in subscription fees every year due to the proliferation of shared accounts. “Group buying” and “white prostitution” seem to have become a kind of political correctness among Netflix users. Allowing shared accounts to bring Netflix’s user increment has long been These deepening negative effects cannot be offset.
The epidemic situation is improving, and the audience returns to the theater
Netflix insists that its films should adhere to the principle of “simultaneous online and offline release”, which is a challenge to the rules of the traditional film industry. The feud between streaming media and theaters has led to the fact that streaming movies frequently miss the best picture Oscar due to the bias of the judges. Produced by Netflix, “Roma” released in 2018 is a very representative of this part of streaming movies instance.
As the Golden Lion Award-winning film at the 75th Venice International Film Festival, “Roma”, which had already won the much-anticipated film, lost to the almost unpopular “Green Book” at the 91st Academy Awards. Since then, Netflix has been nominated for best picture every year, but has never won a work for it, and Netflix has missed the perfect opportunity to exert influence on offline theaters again and again.
The artistic achievements of “Roma” are obvious to all, and the 91st Academy Awards have been controversial because of this
Although Netflix has been continuously improving the transmission specifications of streaming media in order to compete with offline theaters, there is still an insurmountable gap in the audio-visual enjoyment and entertainment services that theaters can provide for mobile devices. With the gradual normalization of the epidemic abroad, the schedule of films has returned to normal, and theaters have reopened. Netflix has eaten up the dividends brought by the epidemic, but has no good follow-up countermeasures to offset the negative impact of the fading dividends.
The global epidemic of the new crown epidemic that began in 2020 has caused incalculable losses to the offline box office. Netflix chose to accelerate the layout of theatrical content at this time. This behavior, which is regarded as robbery, has further damaged the interests of the traditional film industry. Netflix has been testing Hollywood’s bottom line again and again, but it has never been able to get rid of its dependence on Hollywood. Perhaps it is time for Netflix to rethink and try to repair its relationship with the traditional film industry.
Expansion of revenue is hindered and value-added services are absent
In addition to expanding offline, Netflix is also trying to change its single subscription-based service to bring more value-added content to paying users, which will help save Netflix’s declining user viscosity, share the development costs of original IP, and Generate additional revenue for implementing ad-free streaming content. The diversification of forms of expression is an important channel for content monetization, but it is clear that Netflix’s direction has been deviated.
The main products sold on netflix.shop are nothing but IP peripherals. This kind of work can be handed over to professional e-commerce companies instead of independent portals.
Netflix’s attempts to do this are mainly focused on e-commerce and games. Commodities surrounding the series and film and television adaptation games are indeed an excellent way to continue the value of IP. Netflix’s move is nothing more than hoping that high-quality content on streaming media platforms can be Repeated consumption, so as to get rid of the dependence on the subscription system, however, its online store Netflex.shop has to start from the most basic platform service and establishment of authorization system, not only missed the bonus period of a lot of IP, but also obviously lags behind its competitors in development progress.
looks beautiful? Netflix Games don’t even need a controller
Netflix’s game service, Netflix Games, has been targeting mobile devices from the very beginning, and several games released on the platform are almost all small productions with limited interactive experience while re-enacting the episodes. These games are limited in size and lack The complete narrative and depth of content are lacking novelty for fans and less attractive to players. Netflix seems to be stepping out of the comfort zone of streaming media, but in fact it is still spinning around in its own small circle. .
Netflix is in the innovator’s dilemma
Netflix has created and led a new path in the streaming media industry, but this does not mean that Netflix can maintain its first-mover advantage and repressive competitiveness for a long time after traditional giants have entered the game. Netflix’s ecological moat comes from the original content produced from scratch. By turning the popular episodes into IP, it can bring sustainable benefits, and then form a system and generate brand value. However, these conditions are already mastered by established players such as HBO and Disney before they start to lay out streaming media, which means that Netflix competitors do not have to pay too much attention to content innovation in the process of laying out streaming media, nor do they have to take the high risk of innovation. And high input, the ratio of effective output to content cost is higher than that of Netflix.
Disney+’s content ecosystem is something Netflix can’t catch up with overnight.
Netflix is not HBO Max or Disney+. Netflix is betting almost all of its fortune on streaming compared to its rivals, who have made streaming a long-term business. Content is Netflix’s core competitiveness, but it is also its only business growth point. Member subscription fees are almost the only source of income to support Netflix’s huge operating costs. Once the number of users stops growing, it will inevitably affect subsequent content creation. This problem has already begun to emerge, but a series of countermeasures that Netflix has taken, including price increases, region locks, and bans on shared accounts, are passive.
Netflix needs a new story, but where and when will it happen?
The definition of “innovator’s dilemma” in “Management Science and Technology Terminology” is: due to the high risk, high investment and inevitable requirements of development for enterprise innovation, the phenomenon and dilemma that enterprises do not obtain expected benefits in innovation. Obviously, Netflix, which has been advancing all the way, has been caught in a dilemma. Company CEO Reed Hastings said on Tuesday that Netflix is considering launching a lower-priced subscription plan for users who are not sensitive to advertising. This may be Netflix The first “edge” to be smoothed out – but by no means the last.
This article is from my WeChat public account: Xiaotong classmates are extremely praised. In the draft, the content and layout have been slightly modified
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