It’s no secret that Netflix has been coming under fire recently, with negative reactions to the price hikes and worries about the company cracking down on password sharing – plus ever-growing competition from rivals. Now, the king of streaming services is starting to feel the heat.
Stocks plummeted by 37% in response to the news.
Wow, the wheels have come off Netflix as subscriber growth goes into reverse. Look at the after hours figure pic.twitter.com/C7ZnrbToRl — Rory Cellan-Jones (@ruskin147) April 20, 2022
Alongside all this, Netflix co-CEO Reed Hastings suggested that for the first time the platform will explore launching an ad-supported tier in the next year or two – something that Hastings himself has previously denied .
However, Netflix doesn’t really have much of a choice at this point. HBO Max already undercuts Netflix’s Premium tier by half with its ad-supported offering. Meanwhile, Disney+ confirmed that at the end of 2022, it will also offer a cheaper, ad-supported subscription which we estimate to be priced at less than $5, a cost that would undercut even Netflix’s Basic tier.
Even with staple shows such as Better Call Saul , Ozark, and Stranger Things returning soon, it won’t be enough for those who are struggling to pay the bills. Just before the investor call, Fandom released its State of Streaming report, exploring what its readers factor in when choosing a streaming service.
The study reported that 76% of respondents cited monetary reasons as the number one factor in cancelling a streaming service. In addition, users surveyed believe that Netflix is only worth around $10 a month – half of the cost of the Premium tier in the US.
Netflix didn’t hint at the price of its future ad-supported tier, but it will have to be extremely competitive to help claw back the losses it is making this year. In addition, it shouldn’t limit the option to just the Basic tier, which offers only 480p quality and no simultaneous streams. This will only make the streaming experience worse, and not paint the new tier in a good light.
The company does have a few more ideas to help generate revenue, which includes doubling down on plans to limit password sharing .
Hastings stated the following in a video about the quarter’s earnings: “We’re working on how to monetise sharing… Remember, there are over 100 million households that already are choosing to view Netflix. They love the service. We’ve just got to get paid in some degree for them.”
Whilst the numbers on paper show that Netflix could theoretically make back revenue on extra users, people actually paying for it is another matter entirely. Huge numbers of family members and friends share Netflix purely to keep prices down. Adding on additional costs when the service is already one of the most expensive out there is not a smart move.
Another way that Netflix is planning on saving on the purse strings is to pull back on the amount of content it is making – something that should have come much sooner.
Both HBO Max and Disney+ have proven that investing in a handful of series and films per year (like The Mandalorian or Euphoria) can target specific audiences and spend money more effectively.
In fact, Netflix has gone into a whopping $16 billion of debt in the last decade, according to The New York Times . The company aimed to be cash flow positive by the end of 2021, thereby not relying on borrowing money – a target it missed by $159 million or so , though still says it can achieve in 2022 instead.
The company has also lent into other forms of additional content, like the editorial site Netflix Tudum and its Games section. However, the former acts more of a content marketing platform that currently anyone can access, whilst the latter is still very much in the early stages of rolling out. The service is not incentivising enough for people to stay.
At the end of the day, people will fork out a subscription for a streaming service if it provides something competitive, and Netflix’s prices right now are anything but that.
But the platform has got to act soon because those subscriptions are ever-dropping, and Disney’s cheaper tier will likely come to market before Netflix even gets the ball rolling.
What I’m watching this week
I’m now four episodes into Moon Knight , and when the show’s trailer told us to “embrace the chaos,” it truly meant it. This newest Marvel series follows Steven Grant, a mild-mannered gift shop employee who has a sleeping disorder.
One day, he wakes up somewhere he is not supposed to and discovers that there is way more to his life than he ever imagined. Don’t let the dark tone of the trailer deceive you – there are plenty of whacky and goofy moments, especially when it comes to Oscar Isaac’s very questionable British accent.
You can catch Moon Knight on Disney+ – subscriptions cost £7.99/$7.99 per month or £79.90/$79.99 per year.
You can also read up on how the news-focused streaming platform CNN+ is shutting down after just a month.
Author: Hannah Cowton-Barnes, Entertainment Editor, Tech Advisor
As Tech Advisor’s Entertainment Editor, Hannah is the resident expert in all things streaming, film and TV. Before joining Tech Advisor in 2019, she studied Theatre and Performance at the University of Leeds and created a website dedicated to geek culture and lifestyle. She’s also reviewed a whole range of gadgets including flagship smartphones, wearables and styling tools. Outside of Foundry, she’s written freelance pieces for Polygon, Metro and Den of Geek, and is proud to be a Women Techmakers Ambassador for Google.
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