When people were stuck at home with nothing to do, they practically threw money at streaming services. But back in April, Netflix’s first quarter results gave the industry a wakeup call.
“Oh my goodness, they’re not only not growing by 10, they’re losing subscribers,” said Michael Pachter, an analyst at Wedbush Securities, who adds the streaming boom had stalled – and so had a decade of rapid growth for the most successful service out there. “Netflix has to acknowledge, they’re no longer a hyper-growth company.”
Pachter said the company needs to pivot, from focusing on growing its huge subscriber base to retaining it.
To do that, Netflix will have to tackle subscription cycling, said Eleanor Patterson, who studies media trends at Auburn University.
“Where people go through and like, ‘OK, “Stranger Things” is back, I’m gonna go back to Netflix, I’m gonna cancel my Paramount+,'” she said – especially as record inflation causes people to tighten their entertainment budgets. “How do you get people to be continuous subscribers?”
Patterson says one tool Netflix is trying out is spacing out episodes of popular shows, like “Stranger Things” and “Ozark” – over a few weeks, rather than all at once. You know, like they used to do on cable TV.
“Again, it’s like everything new is old and everything old is new again,” Patterson said.
Another old trick Netflix is borrowing? Selling ads to bring in revenue.
“There’s only so many consumers out there that are willing to pay full price,” said Paul Erickson, a research analyst with Parks Associates. And pay it continuously. But by year’s end, Netflix subscribers will have the option of downgrading to a cheaper-ad supported tier, rather than leaving altogether.
Erickson says we can also expect Netflix and other services to trim content budgets and double down on what’s most popular.
“It’s going to make everyone get smarter, sharper and more insightful about the people they serve as their customers than let’s say during the pandemic,” he said.
When we couldn’t afford to be so picky.
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