Netflix will have to be more financially disciplined moving forward

Shawn Knight

Posts: 14,250   +159
Staff member
In brief: Netflix is reportedly looking to rein in spending on original content after losing subscribers for the first time since 2011. Sources familiar with the company's strategy told The Wall Street Journal that after turning out over 500 original programs in 2021, the company is looking to reduce its output and focus more on producing quality programming. Specifically, Netflix will revamp production deals to limit risk and prioritize productions with the greatest return, not the biggest reach.

What's ironic is that Netflix is largely responsible for the current state of streaming. Years ago, the industry was far more consolidated as several studios simply licensed their content to Netflix for digital distribution. Then, Netflix decided to get into the original content game, but with no track record, they had to overpay to win bids for high-profile shows.

"That was the cost of entry, the cost of doing business," Bela Bajaria, the head of global TV for Netflix, said in a recent interview.

It wasn't cheap, but it worked. Early originals like House of Cards and Orange is the New Black helped grow the service, and soon enough, licensing partners wondered if they could replicate Netflix's success on their own. Disney took the plunge, pulling its movies from Netflix and launching its own streaming service called Disney+.

Others with sizable media libraries would also test the waters with exclusive streaming platforms. That has led to a lot of fragmentation in the market, with services like Paramount+, Peacock, Hulu, HBO Max and others all vying for your monthly sub.

Netflix has continued to invest heavily in original content, and this year will be no different. The company expects to spend more than $20 billion on content creation in 2022. Stranger Things 4, due out next month, reportedly cost $30 million per episode to film. The main difference nowadays is Netflix is spending money not only to grow and maintain its subscriber base but fend off competition that didn't exist before.

Video streaming is seemingly at a crossroads. Continued fragmentation – even more services vying for your money – doesn't seem sustainable for anyone involved. Perhaps consolidation is the answer?

As for Netflix, more focused spending could help. The streaming giant is also open to cheaper subscription tiers and is exploring how to monetize shared accounts. Also, if the industry does consolidate, perhaps Netflix could strike up new licensing deals and reduce spending on expensive originals. One thing appears obvious - further price hikes while already on unstable ground don't seem like a good idea.

In the near future, however, things are likely to get worse before they get better. Netflix said it anticipates losing another two million subscribers in the second quarter, thanks in large part to its withdrawal from the Russian market.

Image credit Venti Views, Mason Kimbarovsky

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Dimitriid

Posts: 2,216   +4,268
Netflix is reportedly looking to rein in spending on original content after losing subscribers for the first time since 2011

If anything that would make things *worst* for them. I'm sure they might want to focus on just dropping the low quality stuff like all the reality shows but the well produced stuff is so expensive by comparison at least some of that will get cut too and henceforth, give people even less of a reason to remain subscribed.
 

NintPlayBox

Posts: 58   +55
If they focus on quality vs quantity and bringing back cancelled shows that have its loyal following such as Travellers, The OA, Sense8, among others, then Netflix could certainly turn things around for the better.
 

Revolution 11

Posts: 136   +174
If anything that would make things *worst* for them. I'm sure they might want to focus on just dropping the low quality stuff like all the reality shows but the well produced stuff is so expensive by comparison at least some of that will get cut too and henceforth, give people even less of a reason to remain subscribed.
I agree with what you are saying but I think there is a sweet spot where Netflix is more selective about what stories they are putting on their catalog without overpaying for blockbuster quality shows like Witcher. Netflix should be making more original animations (they fired their animation head recently, a stupid move IMO), more licensing of popular niches like anime, more foreign films from Bollywood and South Korea, etc etc etc.

All of this content is content you can't find on Disney Plus or any of the other mainstream streaming services. Netflix has some of this content but needs more, like a couple of years ago.
 

Dimitriid

Posts: 2,216   +4,268
I agree with what you are saying but I think there is a sweet spot where Netflix is more selective about what stories they are putting on their catalog without overpaying for blockbuster quality shows like Witcher. Netflix should be making more original animations (they fired their animation head recently, a stupid move IMO), more licensing of popular niches like anime, more foreign films from Bollywood and South Korea, etc etc etc.

All of this content is content you can't find on Disney Plus or any of the other mainstream streaming services. Netflix has some of this content but needs more, like a couple of years ago.
Ironic that you mention The Witcher which for most of the books it's based of, it's just a guy talking: With mages, with villagers, with nobles, with military people and mostly with his companions while traveling but I don't know if a faithful adaptation to the books would be as successful so you're right in the how they are approaching things but ironically enough could still work even with the same material anyway.
 

mcclurken

Posts: 20   +44
TechSpot Elite
Netflix took a strategic gamble which failed thanks to increased competition and Netflix's own content misses. I admit I'm a hard viewer to program for but I've dipped into a few of the new shows to see what was up and most of them I didn't even make it through the first episode. The only thing keeping my subscription alive, which is pretty dang expensive at this point, is the comedy specials and BBC content. And those are running thin, too. So it looks like I may be one of the two million they've forecasted. Between Prime Video, AppleTV+, Curiosity Stream, Nebula, HBO Max and Youtube I don't think I'll have much trouble finding something to watch without Netflix.
 

waclark

Posts: 464   +312
Perhaps consolidation is the answer?

LOL, I thought the whole purpose of streaming was to get away from the consolidation of cable providers.

I have said, in the past, that I think there needs to be a way to either package channels like Netflix, Hulu etc together or to pick your shows and bundle shows, not channels.
 

Vanderkaum037

Posts: 42   +46
I think they will take a two-pronged approach. Prong 1 will be flagship prestige programs like Stranger Things. These will be loss-leading, meaning they will probably spend quite a bit on them in order to raise the profile of the Netlfix brand. Prong 2 will be what I call the "low-hanging fruit" prong. This includes inexpensive "reality" shows like "Love is Blind," and niche foreign shows. Netflix performs a kind of international programming arbitrage by licensing this foreign content, but I suspect demand/competition from other streaming platforms will make international content more expensive as time goes on. Ultimately we will end up with the same expensive wasteland that cable TV has become.
 

McMurdeR

Posts: 536   +673
I think it's been a pretty ok journey - they're single handedly responsible for blowing up the old cable companies' hold on TV entertainment.

They're victims of their own success - and they've blown a lot of that success on mediocre quality content.

I think they need to watch those price increases though - it's absolutely the wrong approach to the current competative landscape.
 

RudyBob

Posts: 625   +593
Does that mean no more heart tugging, embracing, woke, etc. series making up history? And more super hero's saving the nation...I can't wait.

Frankly just more girls in real tight clothes is all they need
 

p51d007

Posts: 3,231   +2,770
Several reasons why netflix is losing subscribers.
1. Content. Previously, the "movie industry" leased/rented their content to Netflix.
2. Movie Industy. They said, why should netflix get all the gravy? We'll pull our movies
from Netflix, and setup our OWN streaming service.
3. Price. What started out as "eight bucks a month" has increased too much, given what
content they have to offer.

I remember when Cable was king, when Blockbuster was king...in a few years will we be
saying I remember when Netflix was king?
 

Squid Surprise

Posts: 5,335   +4,981
I believe the adage "Adapt or die" fits here...When Netflix was the only major place to stream content, they could do what they pleased... now they have competition - and competition from some large companies...

They have to adapt... or die... my guess is the latter - and then one of their competitors will buy them up... Disney/Netflix anyone?
 

Aceseven

Posts: 315   +399
LOL, I thought the whole purpose of streaming was to get away from the consolidation of cable providers.

I have said, in the past, that I think there needs to be a way to either package channels like Netflix, Hulu etc together or to pick your shows and bundle shows, not channels.
There is, it's called piracy.

right now theres too many services cranking out crummy content, and when you do hear about a show or flick thats good there may be a chance you dont even have the service its on, in some ways I miss cable because it was simple, everything was just "there" and the closest thing to that now is illegal to partake in...or just pay for all these streams and end up paying more than you did for cable in the past?

How do you fix the issues with streaming when it'll just lead right back to cable?
 

Squid Surprise

Posts: 5,335   +4,981
There is, it's called piracy.

right now theres too many services cranking out crummy content, and when you do hear about a show or flick thats good there may be a chance you dont even have the service its on, in some ways I miss cable because it was simple, everything was just "there" and the closest thing to that now is illegal to partake in...or just pay for all these streams and end up paying more than you did for cable in the past?

How do you fix the issues with streaming when it'll just lead right back to cable?
Agreed - piracy, alas, is the only way to go to get everything you want without paying a fortune...

But... I think the answer will simply be various streaming companies being bought out... soon enough, it will be back to 3-4 companies and you'll be able to subscribe to 1-2 and get just about everything you want...
 

kiwigraeme

Posts: 1,134   +827
I saw an article a month or 2 ago about why does Netflix drop popular shows - something about a mighty Algorithm . Anyway Netflix and the likes have to engage their brains - They pay mega bucks for Friends, Simpsons etc - Yet they don't want to create such shows .
here's a simple question Netflix

Why should someone be loyal to you if you are not loyal to your subbers ?

Ie the bean counters - all those high paid people do not understand the human heart , or loyalty - as they have none - they would leave Netflix tomorrow for a higher paid job .
So keep popular shows
Run some weekly Soaps - not able to binge watch.

Same lesson for Google - stop being flakey and support your products - you could have easily had the biggest music streaming service - Easily - yet Google Music is devoid of charm and humanity .
Watch on youtube - lots of comments -, even a nascent community - YT music - Nope none of that .
Don't watch much TV - but did see the Southpark episode where Netflix backed anything

Plus do teens edgy stuff - like Red Bull at beginning , and like MTV ******* - that kind of mindless fun . Also that Anime/Cartoons thing someone said is good - get kids hooked - so parents keep subs
Plus lots of things get made and taken to providers to bid over - get the best buyers - no money upfront for that stuff unless a sweetener as future funding if show good
 

NumberSix

Posts: 147   +200
Stop paying Hollywood stars millions and millions to make mediocre films would be a good start.

My Netflix sub has gone from £4.99 to £15.99, they have gone from the cool kid on the block to the money grabbing long lost aunty at a funeral and as the cost of living demon takes a hold of my plums and gives them a good squeeze dropping Netflix will be the easiest of money saving choices.
 
I live in Brazil and pay for my Netflix via my UK bank account (don't have bank account in Brazil). I do not share my password and I'm the only one using Netflix (and they will be able to see that too), so will they try charging me extra for using my Netflix account in a different location, than the address from my payments??

If so I will have no choice but to cancel my Netflix account, not happy thoughts :(
 

Neatfeatguy

Posts: 884   +1,524
I think one of the things that has worked so well for Netflix is also one of it's biggest failures:

Dropping all content for a new show at one time to let people binge watch in a day.

It's amazing to watch a show you like when the new season comes out in rapid succession. That instant gratification we love so much and clamber for because we can't get enough....just one more episode and then one more and pretty soon you've exhausted the 6-10 episodes (seriously, how are 6-10 episodes a complete season? Remember the good old days when a TV series would run upwards of 24 episodes in a season?) and you're not left with the "other stuff" that Netflix has to offer that you don't care about.

That "other stuff" on Netflix is just filler they're hoping you'll watch just enough to keep your subscription going until something else drops that you enjoy.

Netflix needs to better stagger their release and start doing weekly drops of episodes and in between those weekly drops of episodes, they can work on releasing new movies from time to time to help fill the gaps. They need to work on maintaining their customer base throughout long term and not just having people sub for a month to binge watch a new season or two of something that dropped, then cancel their sub for months at a time and renew again to binge watch something, then drop again for months at a time ad nauseam.

If they can fix their stupidity, maybe they can look at bringing back some of the more popular shows they dropped because they were "too expensive" to continue to create since they're not spreading themselves so thin.

On a side note, I went through a list of canceled Netflix shows and there are at least half a dozen that came out over the past 12-18 months that I really liked that Netflix canceled after 1 season; one of them made it to 2 seasons before being canceled. If my 9 year old didn't watch Netflix almost daily, I'd drop my subscription. I have very little to look forward to coming up on Netflix....I think Stranger Things 4 is about it and that comes out very soon.
 

wiyosaya

Posts: 7,838   +6,824
They could also be less libtarded.
You do realize that you do not have to watch - yes?
There is, it's called piracy.
Its not an answer. Just go to your local library. Chances are, they have what you want on DVD.
right now theres too many services cranking out crummy content, and when you do hear about a show or flick thats good there may be a chance you dont even have the service its on, in some ways I miss cable because it was simple, everything was just "there" and the closest thing to that now is illegal to partake in...or just pay for all these streams and end up paying more than you did for cable in the past?
So, if you want to watch one thing, subscribe to a service for a month, watch your one thing, then cancel your subscription. Simple.
Or, if that service releases the content on DVD, wait for it to release, then borrow it from your local library. That second option requires delaying gratification. I think that is a rare trait in this day and age.
How do you fix the issues with streaming when it'll just lead right back to cable?
IMO, we cannot fix the issue, its the providers that are going to have to change their model. A few are learning the hard way. CNN started a streaming service, but reality slapped them squarely in the face, and they closed their streaming service a month after it started.
Agreed - piracy, alas, is the only way to go to get everything you want without paying a fortune...
Local library, too.
But... I think the answer will simply be various streaming companies being bought out... soon enough, it will be back to 3-4 companies and you'll be able to subscribe to 1-2 and get just about everything you want...
I doubt it will go back to what it was before. Personally, I don't think Netflix will fail. Articles like these draw attention because everyone thinks OMG, Netflix is losing subscribers. Lions, tigers, and bears, OH MY!!! But the reality is that they still have more subscribers than all the other services, and if I am not mistaken, they have more subscribers than all the other services combined.

Despite what the conservatives think, I think that Netflix has more variety in content than all the other services. Perhaps our conservative friends cannot delay gratification long enough to find the content that they like.
 

Sausagemeat

Posts: 1,597   +1,422
I think the biggest problem is the price. As soon as it went up to £15.99 a month I cancelled. That puts it at more expensive than my data plan, Spotify, even my home broadband. I still have prime and Disney plus, I haven’t missed Netflix now I think about it.