Netflix reported this week that it lost 200,000 subscribers during the first quarter of 2022, which has meant the first fall of the platform in a decade. However, the worst is yet to come as it estimates that during the second quarter it will suffer a drain of another 2 million users. In addition, the 35% drop in the price of its shares has caused, overnight, about 54,000 million dollars of its market value to disappear. The situation is clearly not good, and the platform is already studying measures to reverse it; among them, changing its strategy around the launch of original content to focus on the quality of the titles and not on the quantity.
But moving from a quantitative to a qualitative framework requires Netflix to adopt greater financial discipline. As published The Wall Street Journalthe company has decided to renew the production agreements prioritizing original titles that can offer a higher return, and not the larger ones. For this, the relationship between the audience of a program and its budget would be analyzed mainly.
In this way, Netflix aims to launch a smaller number of its own movies and series in 2022, compared to the 500 titles released in 2021. However, that does not necessarily mean that it will reduce spending to produce them; the company still thinks increase by 20,000 million dollars the investment to produce content during this year. The idea is not to tighten your belt, but to be more intelligent in choosing where to direct the available money.
This will be a challenge for the platform, especially when dealing with the main references of American cinema and TV. After all, in Hollywood they had gotten used to Netflix spending millions without thinking too much about the result to be obtained. That the platform now considers cutting ties with titles that do not offer great returns, regardless of their critical reception, is a point of particular concern for producers.
There is consensus in the entertainment industry that Netflix he rested on his laurels, in relation to the growing competition in the world of streaming. That the platform leads the number of subscribers globally would have led to it not giving real importance to the growth of its rivals, who have brought out some very strong weapons. Disney+ has done with the Marvel Cinematic Universe and starwars; hbo max, with the premieres simultaneously with the cinema listings (or with very little difference in time); Y Paramount+ has played an interesting card for proposals such as Halo Y Star Trek: Picardjust to mention a few cases.
However, Netflix maintains that the reason behind its recent drop is because users share their account passwords. The platform ensures that shared accounts are costing you about 100 million additional subscribers, and that is where you should focus your efforts. And while it’s true that attracting even a fraction of those individuals and converting them into genuine customers would make a big difference, it would seem to be targeting the tree and not the forest.
Netflix’s disdain for its competitors would have slowly become a serious problem. According to the producer Jeffrey Fierson, the platform did not even plan strategies to prevent some of its releases from coinciding with the premiere of important titles from other streaming services; the executive experienced it firsthand when his series day-break debuted on Netflix almost simultaneously with The Mandalorian on Disney+.
“If there’s one thing I’d say is Netflix’s fault, it’s that they’re an island. do not see what happens outside your wallsor that they know and the arrogance is so great that they don’t care,” he told WSJ.
A review on content produced outside the platform
That Netflix plans to release fewer original series and movies, but of higher quality, is not the only idea that the company is contemplating. In their quest to be more financially responsible, their top managers are also looking at reduce spending on third-party content.
One of the measures would involve reducing the budget for new programs created by studios that do not belong to the platform by up to 25%. But that would not be the only thing; they would also aim to change the method of licensing such content in the long term.
Until now, Netflix has guaranteed the rights by paying a premium over production costs. It consisted of a figure that included between 20 and 35% of the total budget of a series, for example. However, they would now propose pay a fixed sum to prevent the numbers from going through the roof in the event of a cost increase.
We’ll see if the change in strategy gives results in the medium term. The truth is that Netflix is preparing for the shock of the second quarter of 2022, hoping to come back from the second half. For now, end users will not encounter major changes, beyond the implementation of a cheaper plan and ads; but they can expect a catalog of premieres slightly less congested than 2021.