Party’s over as competition, governments take aim at streaming giant
It wasn’t too long ago Netflix was the toast of the town, heralded as the best entertainment had to offer on a new, emerging platform. The company partied hardy for years feasting on praise as the darling of Wall Street.
Well, the bill is now due.
In a stunning reality check, Netflix revealed Tuesday it has lost around 200,000 subscribers in their first quarter report – the biggest drop in a decade. As a result, Netflix stock went into a freefall Wednesday, falling 35 percent and losing a whopping $500 million of its value – the worst trading day since October 2004, well before streaming was a thing and when they more known as a DVD-by-mail company. Netflix also warned they could lose even more subscribers in the second quarter – up to two million by July.
The news affected other big Hollywood studios, as Disney, Comcast, Warner Bros. Discovery, Amazon, Roku, and Paramount all posted stock losses Wednesday, raising questions about the future of streaming (another factor affecting Disney stock is the current controversies the company is involved in Florida.)
And the bad news kept coming Wednesday evening: Bill Ackman, who is the CEO of capital investment firm Pershing Square, decided to dump all of his Netflix shares and took a $400 million loss. And on the creative side, The Wrap reported a number of high-profile creators in Netflix’s animation division had their creative freedoms reduced by new management – resulting in an exodus of talent from the streamer amid accusations of “staged data”. One of those exiting is Jeff Smith, whose Nimona project – already delayed due to corporate red tape, was among those cut.
The reason for the subscriber drop varies. Like a lot of companies, Netflix pulled out of Russia after the country invaded Ukraine; inflation due to higher gas prices are forcing consumers to cut back on spending; increasing competition from rival studios’ streamers meant as a response to Netflix; too much subscriber churn; and password sharing, depriving Netflix of millions in revenues; Netflix said this week they are looking at ways they can crack down on the process.
Netflix is also exploring low cost ad-supported options to bring in more subscribers – an idea panned by Wall Street.
“It is scary if the only way to reinvigorate growth is offering cheaper products that worsen the consumer experience, essentially making it more like the dying linear TV experience,” Lightshed Partners media analyst Rich Greenfield said, obviously referring to the flood of “FAST” (free advertiser supported television) streaming services flooding the market such as Pluto, Xumo, Redbox, Samsung Plus, Roku, Freevee (formerly iMDB TV), and countless others. While the “FASTs” offer more variety and of course free, the downside is the channels are filled with intrusive commercials – particularly the political kind (recently, this viewer watched a MST3K episode where an ad break was randomly dropped right in the middle of an action scene!)
The stock drop is also raising questions on streaming’s viability going forward – especially in the SVOD (subscription video-on-demand) sector. In his Hollywood Reporter interview, Greenfield noted SVODs are “certainly nowhere near as profitable as the legacy businesses that streaming is replacing.”
The vast number of programming provided by these services are overwhelming – and there’s a glut of material, which makes it harder to stand out in the “Peak TV” era, with over 500 scripted shows per year. Some of Netflix’s newer shows failed to gain buzz with audiences recently, including the ridiculously over-hyped Chicago Party Aunt.
Netflix is now a target from many fronts. On Twitter Wednesday, many television writers complained about the treatment they’ve received by Netflix and other studios by skirting rules and subdividing writer’s rooms. What was supposed to create more opportunities for writers due to the increase of programming opportunities has instead turned into a nightmare with short series orders with overall lower pay and residuals.
So when Netflix starts offering a tier with commercials, it's that regular TV? Does that mean better residuals? Will newer writers NOT have to work in 6 mini-rooms/yr to make what I made ten years ago on one show? If we're rolling shit back, we need to roll it all back.— sierra ornelas (@sierraornelas) April 20, 2022
Netflix is going to be a big issue in the next Writer’s Guild negotiations with studios next year, which will be rocky to say the least and could result in the first industrywide work stoppage since 2007.
Meanwhile, another broadside is coming from local governments.
The Ohio Supreme Court recently heard a case involving the Cleveland suburb of Maple Heights, who is suing Netflix and Hulu saying they should pay local franchise fees similar to cable companies. Closer to home, north suburban East Dundee recently passed a law to tax streaming services at 5 percent, similar to what Chicago did a few years ago. The reasoning is with consumers cutting the cord, tax revenues from cable subscriptions to help fund everyday basic government functions are drying up.
And the accolades are drying up too as Netflix came away with just one Oscar in the recent Academy Awards, the worst in recent memory.
So in essence, Netflix is no longer the darlings of the media industry and we knew it would be a matter of time. On Twitter Wednesday, this person referred to Netflix as “the Clear Channel of streaming”, a reference to the since-renamed iHeartMedia and the way they cut costs, eliminated local DJs for remote voice trackers, and nationalized music playlists for hundreds of stations across the country.
Now Netflix using the same Clear Channel playbook – cancelling shows before they become profitable, slaving to an idiotic algorithm and relying on “phony data”; changing the process television shows are written – and screwing over writers in the process by keeping wages down; lousy career advancement; and on and on and on. What was supposed to be a welcoming environment for creative talent scorned by traditional media is now one even worse than traditional media. And it’s no surprise nobody has sympathy for them – Netflix is destroying streaming the same way Clear Channel destroyed radio.
It’s lonely at the top. For Netflix, the phrase is no more truer than right now.