Twelve years ago, Jeff Bux, then CEO of Time Warner, compared Netflix to the Albanian military. “It’s a bit like the Albanian army is going to take over the world.” “I don’t think so,” Bux told the New York Times, ignoring the streaming service’s ability to take on established media players.
Well, the Albanian army won. Time Warner followed Netflix in streaming, NBCUniversal and Disney came after that and so on. In the UK, the BBC and ITV have invested in their streaming portals. Now the media lived in the world of Netflix.
In the years that followed, hit after hit – from Stranger Things to Bridgerton – solidified Netflix’s position as the world’s leading streaming service. Subscribers have grown as the coronavirus shuts down much of the world. And then in January the boom seemed to end. ,
Worldwide, Netflix said it expects to add just 2.5 million new subscribers in the first three months of the year, well below the 4 million in the first quarter of 2021. The news helped wipe out nearly $ 45 billion ( £ 33 billion) as investors worried that Netflix’s glorious days were over.
Netflix released its latest quarterly results on Tuesday. And some analysts worry that increased competition from Apple, Amazon, Disney and traditional media players means the Albanian military is finally on the run.
The story was further reinforced last month when Coda defeated Jane Campion’s “The Power of the Dog” for Oscar for Best Picture of the Year. The shocking story of a child of deaf adults was produced by Apple, and the criticized neo-western of Campion was produced by Netflix. It was the first time a film released by a streaming service had won the highest Oscar.
After redefining the media landscape, Netflix had problems and now – for some – it’s time for Netflix to change its game.
Our thesis is that you should have news and sports Laura Martin
For Laura Martin, an analyst at Needham & Co, what was once a key strength of Netflix has become his biggest weakness.
In the previous quarter, Netflix released the biggest TV show of the year, Squid Game, and its two biggest movie releases to date, Red Notice and Don’t Look Up. The company has spent a staggering $ 17 billion (£ 13 billion) on content in 2021 and is expected to spend around $ 19 billion in 2022.
But that’s not enough to sustain the kind of growth Wall Street is used to. “Originals and entertainment are no longer enough,” Martin said. “Our thesis is that you should have news and sports. You have to have breaking news, because it attracts people when, say, Russia invades Ukraine or sports, because when there’s a really good game, then people flock to you and stay there.
The fun alone, she says, is too narrow, and the company’s success may have blinded them to the need to offer a greater variety of content.
When Netflix launched, its main rivals in the United States, its largest market, were cable companies that offered sports and news as well as entertainment, but at a much higher price. “In the beginning, when it was $ 15 a month and they had great library content from all the big studios, it was a really good deal,” she said. “Now that all the big boys are in business, they all have much bigger libraries than Netflix and they have news and sports. The competitive landscape has changed for Netflix and they haven’t. “
But while Netflix may not be growing as fast as it used to, it’s too early to write it off. Even another disappointing quarter – and another drop in stock prices – is unlikely to reduce the huge strength of the streaming company in a media world that is still catching up.
Netflix had 222 million subscribers worldwide at the end of last year. People spent 1.65 billion hours watching Squid Game in the first four weeks. And it’s still one of the best-performing stocks in two decades, gaining more than 34,000 percent since the company’s initial public offering in 2002. It made $ 5.1 billion in 2021, and the budget its content surpasses most of its traditional media rivals.
There was a “reset,” said Brian Wieser, global president of business intelligence at GroupM. In part, this reset is “a recognition that the streaming business economy is not as good as traditional media business.”
But this traditional media business is still in trouble, and if you step back and look at what Netflix and its counterparts are doing with the media landscape, he said, it’s clear that streaming is here to stay, and it’s the traditional media companies that remain the most -endangered.
“We’re moving to a much more globalized economy, and it’s a much more globalized media industry than it used to be,” Wieser said. Hits such as South Korea’s Squid Game and All of Us Are Dead show that Netflix remains the leader in this global market. “They are just so big in this space that growth will naturally be more limited,” he said. “That doesn’t mean the business is weak or the long-term profit profile isn’t solid.”
“Sometimes we lose sight of the prospect of these things,” Wieser said. “When you still have one of the most valuable media companies on earth and you’re still probably one of, if not the most influential media companies, because of how much you spend on content, the latest results were really disappointing or expectations were not met. ? “
Were the latest results really disappointing or was it a mismatch? Brian Wiser
Meanwhile, the streaming world continues to chew on the business of traditional and ad-supported cable TV, and this, combined with the global vision that Netflix has brought to the media, gives it and its rivals plenty of room to grow.
Competitors may have been jealous of Netflix’s New Year’s crisis, but the fall has not damaged either the scale of its ambitions or the depths of its pockets.
The UK’s ITV recently announced a new streaming platform, ITVX, which hopes to be a “national champion” in the battle for British viewers against the streaming giants. The media company’s total content budget is expected to be £ 1.23 billion this year. Netflix alone will spend 11 times more.
In the United States, consumers spent about $ 140 billion on professional video content last year, from cable content and theater to streaming services and purchases of physical media. Streaming services account for about $ 30 billion of that money; the cable still costs $ 100 billion, but still loses subscribers. From 2016 to 2021, pay-TV will lose more than 50 million adult viewers in the United States, and less than half of all U.S. households will have a cable TV subscription by 2023, according to a study by Insider Intelligence.
Maybe even the latest losses show that Netflix is winning. The fact that this year’s best picture battle was a battle between Apple and Netflix shows how firmly built-in streamers are. The days when Netflix was the Albanian army may be over, but the truth is that media companies are now all Albanian.
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