Home Technology

What's Next for Netflix as Basic Needs Cost More Now – TIME

The pandemic sparked a boom for video streaming services like Netflix, Disney+, and Peacock. In 2020 and 2021, Netflix added 54.6 million subscribers, many of them in the frightening, isolating six months after the world locked down and people sought entertainment in the safety of their homes. Now, that unprecedented wave of growth may be hitting its limits, as the company lost subscribers for the first time in its history, cut around 25 people from its marketing staff, and has begun piloting ways to crack down on sharing passwords.
Netflix’s losses weren’t simply theirs to bear. In the aftermath of Netflix’s results, other streaming services have taken a hit—Disney, Paramount, and Warner Bros. Discovery, all of which run streaming services, saw their stock price drop as well. The same week that Netflix cut some of its marketing team, CNN+, the news service’s foray into streaming, shuttered.
It all raises the question: Was the pandemic peak streaming, and we’re now on a perpetual downward slope? On the heels of its April 19 letter to shareholders—where Netflix said it lost 200,000 subscribers instead of growing by millions as expected—the company lost $60 billion in market capitalization in just over a week. Netflix says it already expects to lose a further two million subscribers in the second quarter of 2022.
“In 2020, people were locked at home and you couldn’t do anything but watch TV,” says Maria Rua Aguete, senior director of media and entertainment at London-based consultancy Omdia, which regularly analyzes the state of the streaming market. “It’s only natural to go down after a boom.”
The next question, then, is how streaming services will find their new normal, as user demographics change and the cost of basic needs continues to rise.
It’s not just that pandemic viewing habits may be reverting. For one thing, viewers may be overwhelmed and exhausted by the plethora of services available, according to a Nielsen study—which found nearly half of users felt that way, even if they generally like the ability to watch streaming video.
“The number of video streaming services in the U.S. has reached a ceiling,” says Rua Aguete.
At the same time, there’s a potential generational shift.
“If there is a reckoning coming, it’s because all emerging data suggests millennials and Gen Z are not only less interested in streaming TV and film than the previous generation, they are also consuming more content on YouTube and TikTok,” says Andrew A. Rosen, founder of streaming service analyst PARQOR, and a former Viacom executive.
This issue was also noticed by consulting firm Deloitte, in its 2022 digital media trends survey. And for the first time, the most avid users of Netflix are likely to be those aged 24 to 44 in some markets, rather than those aged 18 to 24, according to research firm Ampere.
If Netflix broadens some of its account-sharing restrictions, it may be particularly hard on younger people who are used to sharing Netflix passwords. But it’s not just younger generations—cost of living increases are squeezing users of all ages.
“With gas and electricity bills going up massively, you almost worry about switching the TV on at all,” says Emma Heath, 52, of Northampton, England, who recently cancelled Netflix, along with her satellite TV. United States inflation has hit a 40-year high, while the U.K. is doing little better, with inflation at a 30-year peak.
Rua Aguete says: “Inflation is going up, the cost of living is going up. If in 2020, we took six or seven services, do we need them all now?”
As consumers grapple with higher costs for basics like food and fuel, services like Netflix are hiking prices. In January, Netflix told U.S. consumers that its standard two-screen service would rise to $15.49—the second price increase in two years. A similar increase in the U.K. followed shortly thereafter. Nearly four in 10 U.K. households say they plan to cancel a paid streaming video service, according to research by Kantar.
These factors may add up to troubling news for streaming services trying to stand out among the crowd. Netflix rose to prominence by doing just that—with original hit shows like Orange Is The New Black, delivered ad-free. But now, Rosen says, the landscape has changed.
“To date, Netflix has driven a tightly constructed narrative around a subscription model only, and the objective of ‘we want to entertain the world’,” says Rosen. “Until the past two quarters, it has defied market concerns for its billions in debt that funded the content spending to pursue that objective.”
Netflix could not be reached for comment.
Netflix has said it’s looking at an ad-supported tier that would cost less. “Think of us as quite open to offering even lower prices with advertising as a consumer choice,” Netflix co-founder Reed Hastings said on a conference call with analysts after the results were announced, though there was no formal indication in the shareholder’s letter that the company would be pursuing an ad-supported model.
Should it decide to do so, Netflix would be following in the footsteps of many competitors who have introduced similar lower price points for consumers worried about cash. It’s not all bad news, either: according to Omdia’s analysis, Hulu and Peacock have each managed to increase and maintain their average revenue per user by introducing a half-price, ad-supported option.
Still, Rua Aguete doesn’t believe Netflix is losing its prominent place in the industry any time soon. In the Asia-Pacific region, Netflix posted subscriber gains that helped offset losses in the United States, Canada, and Europe. While the company’s first quarter results were disappointing, and may signal the tide turning, they weren’t necessarily terminal. “It’s challenging times,” says Rua Aguete. “Things are not fantastic around the world, but yes, there is still growth in some countries.”
Contact us at letters@time.com.

source

Ads
Previous articleMicrosoft prioritizing the tech needs of UK small businesses – TechHQ
Next article6 iPhone 14 Leaks. Actually Looking forward to this one | by Youssef Mohamed | The Techlife | Apr, 2022 – Medium