Ahe era is defined by its major innovations and sometimes a simple company name does the trick: the Ford Motor Company more than a century ago, or Virgin in the 1980s. These are the business ideas which sum up a moment of progress. Of course, a little less prophetically, there were also the ephemeral promises offered by DeLorean or Myspace.
Until last week, we were all enjoying the “Netflix boom,” mostly because of what the streaming giant stood for, rather than what it actually was. Netflix was synonymous with easy access to culture, family sharing and turning its back on the superficial commerce of commercial breaks. And it quickly became a rather emotional consumer relationship, especially during the dark lockdowns imposed during the pandemic. Isolated, those confined to the house found comfort in The crown, stranger things, Bridgerton, Money theft, Lupine, Call my agent! or squid game. In fact, for 10 years now in the UK, these boxed shows have fueled a national conversation that has occasionally crossed over with chatter from the rest of the world.
So when Netflix Chief Executive Reed Hastings admitted last week that 200,000 subscribers had opted out in the first quarter of the year, with more likely to follow, fans of the service were forced to reassess. Following the losses, the company‘s share price fell more than 35% last Wednesday, slipping another nearly 8% the following day. Then billionaire investor Bill Ackman decided to sell his Netflix shares, despite a huge loss, because things suddenly looked so scary.
For many in the industry, Netflix’s cry of alarm was a sign that they were waiting until, after a dizzying rise, “peak subscription” had finally been reached. After all, hadn’t music lovers already noticed how complicated their love affair with Spotify had become? It turned out that the freedom to enjoy their favorite tracks was actually a threat to the livelihoods of the musicians who made them.
Among those who claim to have seen the writing on the wall long before Netflix’s announcement are two Swedish entrepreneurs who are betting on a return to a simpler deal. Måns Ulvestam and Karl Rosander, the founders of Acast, the podcast platform, have now created a new e-book and audiobook platform called Sesamy – for which customers will only pay for what they want, whenever they want, on any device. The Swedes believe that the public has understood the premise of a subscription. In their view, it wasn’t just belt-tightening that caused Netflix members to leave the fold.
“We are now seeing the end of something that started with the paywall,” Ulvestam said. “It’s not sustainable because it’s no longer working for clients or for creatives.”
Like gyms that rely on users to forget their monthly membership payments, the membership model, according to the creators of Sesamy, borders on deception. “We think all of these content subscriptions, with their ‘easy onboarding’ and very tricky cancellation, are almost a fraud,” Rosander said.
But surely Netflix, a place where so many UK viewers still go to enjoy their evenings, can’t face disaster? After all, even a show with bad reviews like Anatomy of a Scandal attracts a lot of viewers, while this weekend the new teen drama Heart stroke was met with critical acclaim and hailed by some as the most significant British TV show since It’s a sin.
Much of the rush to mourn over Netflix’s imaginary open grave was in part driven by how the company’s success, which had consistently brought in new subscribers for more than a decade, was held up as an example. for public service broadcasters such as Channel 4 and the BBC. When Culture Secretary Nadine Dorries said earlier this month that she wanted Channel 4 to be free to compete with Netflix, many program executives were quick to point out that the global streamer she admired so much had struggled to establish a viable business model. .
And Netflix itself never liked this rivalry. The company’s position is that UK public service broadcasters are its ‘creative partners’. To back this up, he points to the investment in hundreds of hours of content, including popular shows such as The snake, Giri/Hajiand Dracula. A show like The end of the fucking worldfirst seen exclusively on Channel 4 then broadcast by Netflix, enjoyed a resurgence in popularity when it returned to C4 for a second series.
For those other Netflix skeptics, moviegoers, the news of declining subscriptions carried the sweet scent of revenge. Moviegoers are still sensitive to how the streamer has challenged the financial balance of the cinema’s theatrical distribution model. Once Netflix started producing its own feature films, the Cannes festival tried to take a stand against it by banning films that hadn’t been shown in French theaters. Organizers have warned of an existential threat to the big-screen experience.
But now Netflix has become an important part of the film ecology, with The Irishman seducing director Martin Scorsese into the world of streaming and both The power of the dog and Don’t look up earning Oscar nominations last month.
Like many good movie heroes, Netflix had more humble origins. Long before dominating the entertainment scene, it was an unassuming DVD delivery service, much like Virgin started out as a record company and Amazon once only wanted to sell books. But in 2012, the same year it launched in Britain, Netflix began churning out its own content, including the gripping Washington political drama Card castle. Ten years later, the company has 221.64 million subscribers in more than 190 countries.
However, any documentary about Netflix’s fortunes could not yet chart a dramatic downward path. For starters, some of its financial instability can be attributed to the shutdown of its Russian service following the invasion of Ukraine, and the fact that most of those in the West who want to join Netflix have already done so. .
UK Netflix subscription levels are holding up relatively well, but every form of media service needs to think quickly about what a subscription surcharge will mean. And that thinking has become more urgent with the news that the Competition and Markets Authority in Britain is now set to make ‘subscription traps’ illegal.
So maybe this is all a category mistake? In any case, this is what some analysts argue. We have mistakenly assumed that Netflix is a technological innovator simply because its extraordinary expansion has prompted many media empires to copy it, including Disney, Warner Brothers, NBC and Paramount, not to mention Amazon and Apple. But Netflix isn’t really tech-based: it’s just an entertainment provider that’s become a production studio – and it’s still a very precarious business. As screenwriter William Goldman said so well, in showbiz “no one knows anything”. It’s just not possible for a hit to follow a hit, even if you spend $55 billion on TV shows and movies, like Netflix did between 2018 and 2021.
In reaction to plummeting subscriptions, Hastings and his team suggested they would hold back spending, open their minds to ad serving “in a year or two,” and push quality harder by “stepping it up a notch.” “. . (These three key strategies, of course, are also shared by many old-school content providers.)
A Twitter wit, Jake Menez (@Jake Menez), learned that Netflix is now considering launching a cheaper ad-supported service with the line: “That’s pretty neat. I’d probably give it a catchy name like ‘television’. ” or maybe “cable”.
For the average household, the company’s change in attitude toward password-friendly sharing will be a bigger shock. Six years ago, Hastings said “we love people who share Netflix”. Now, with around 100 million people using other people’s accounts, the chief executive isn’t so relaxed.
The truth is that neither consumer markets nor quality entertainment are infinitely expandable. If we all want to have a supply of great movies and TV shows, we need to make sure the price is right and the performers are paid well. Otherwise, as Rosander dryly points out, TV culture risks reverting to a Renaissance situation, where only the wealthy can afford the good things: “That’s why all the paintings at the time were by the Duke’s wife .”