Chickens Coming Home To Roost

_{“If you could make God bleed, people would cease to believe in Him. There will be blood in the water, the sharks will come. All I have to do is sit back and watch as the world consumes you.” – Ivan Vanko in Iron Man 2}

Netflix’s stock took a dive of 25% (losing $46 billion in value) on shareholder reports that it had lost 200,000 subscribers over the previous quarter. In response, they also announced an intent to crack down on password sharing and offer a cheaper, ad-supported subscription tier. That 200,000 subscriber drop is partially due to no longer operating (for the moment) in Russia due to Putin’s invasion of Ukraine, which “cost” the streaming giant around 700,000 subscribers. More troubling were indications that the company expected to lose two million subscribers over the current quarter. Without getting too doom-and-gloom, Netflix is now dealing with a deluge of big-money competition muscling into the ecosystem it more or less invented. Netflix is now just another streaming platform amid a sea of them.

To be fair, Netflix still leads the world in terms of total subscriptions, with 221 million global subscribers. At least some of this is due to Wall Street being Wall Street, overvaluing the stock by treating it as a tech company as opposed to an entertainment studio, and by giving little quarter to the notion that subscriptions to any and all streaming platforms surged in 2020 and 2021 due to a global pandemic that kept everyone stuck in their house for around 1.5 years. The Covid-19 pandemic caused subscriptions to Netflix (+55 million in 2020 and 2021), Disney+ and the like to skyrocket beyond what would have been conventional levels, meaning that Disney+ (for example) hit their five-year projection in the first 16 months.

The question is whether Netflix still rules when it’s no longer “the danger” but just another streaming platform. Judged as not “the ultimate disrupter” but rather “just another streaming platform,” Netflix now stands out as one that costs more than the competition ($16-$20 a month for HD or 4K plans) and has no added value (no Amazon Prime shipping for that $12-a-month subscription) and is rarely considered home to the “best” film and television content. That’s not always fair, but it’s telling that Bridgerton season two just became Netflix’s most-watched English-language television show ever (ahead of Bridgerton season one) amid sky-high viewership for the likes of Red Notice, Don’t Look Up and The Adam Project and the stock still cratered. But when HBO Max has HBO, Disney+ has Pixar, MCU and Star Wars. What does Netflix have?

While they have their share of winning television shows, quite a few (You, Cobra Kai, Lucifer, Manifest, Schitt’s Creek, etc.) only blew up on Netflix after airing elsewhere. Their habit of ruthlessly canceling shows for/by underrepresented demographics (Teenage Bounty Hunters, G.L.O.W., The Babysitter’s Club, Dead to Me, One Day at a Time, Tuca and Bertie, etc., etc.) means viewers get addicted to a new Netflix episodic at their peril. Netflix’s year-end awards slate (Beasts of No Nation, Roma, Power of the Dog, etc.) is beyond reproach. Netflix’s attempts at imitating Hollywood blockbusters (Red Notice, Bright, Project Power, etc.) still carry a whiff of straight-to-Blockbuster inferiority. Their huge subscription base can guarantee huge audiences for non-IP star vehicles, which is how you create your own franchises. But the films are (generally) almost aggressively mediocre.

It’s one thing to trade quality for convenience when you’re the only game in town for at-home convenience. It’s quite another to hawk “all your favorite movie stars, in films that are 50-70% as good as their theatrical offerings” when you’re just one of a half-dozen major streaming platforms. This could be a paradigm shift whereby Netflix finds itself on the same playing field as its rivals. It’ll thus have to face a new world where it is “merely” the most expensive streaming platform with the least must-watch content. Superior interface aside (and it is the best service, by a healthy margin, in terms of nuts-and-bolts usability), one can subscribe to 2-3 of its rivals (AppleTV at $5, Disney+at $8, Paramount+ for $5-$10 Peacock for $5, etc.) for the same monthly price.

Some of this is the inevitable result of A) everyone trying to copy Netflix’s early-bird success and B) studios becoming stingier with third-party content for the sake of boosting their platforms. The pandemic created a need for quick cash which saw the streamers nabbing some genuine winners, like Skydance’s The Tomorrow War (which went to Amazon), Paramount’s The Trial of the Chicago 7 or Sony’s The Mitchells Vs. the Machines. Give or take Netflix’s smart first-look deal with Sony (tied to their blockbuster first window pay-tv deal and which just saw Kevin Hart and Woody Harrelson’s The Man from Toronto getting sold to Netflix), I don’t think we’ll see rival studios selling off their prized bulls to their biggest rivals anytime soon. Netflix will slowly, but inevitably, become more dependent upon Netlflix-specific content.

My issues with Netflix, and this is not a “good/evil” issue, are how the streaming giant (which innovated and essentially invented a new ecosystem) played by different rules (where each film or television show was automatically a success merely for existing) and helped push general audiences away from theaters for non-tentpole films. That said, Netflix is only responsible for Netflix, and it’s the investor class and media punditry that convinced the rest of Hollywood to transform its entire business model by chasing Netflix’s arguably-inflated stock earnings. As I’ve frankly warned everyone about for years, behavior (staying at home and streaming stuff all day long) demanded by a global health catastrophe might not represent a permanent change in consumer behavior. Hollywood spent the last half-decade uprooting their entire business chasing an inflated myth. Now what?