Netflix is doomed! Netflix is stronger than ever! Netflix is getting more expensive! Netflix is getting a cheaper tier!
It’s been a whirlwind year for the streaming company. Netflix lost 970,000 subscribers in the second quarter of this year, but Wall Street hailed this as a gigantic victory because this number represented nearly a million fewer subscribers than the projected drop.
Aside from a new gaming initiative (which only 1% of users have tried) and potential theatrical runs for big-budget original films like the Knives Out sequel, Netflix’s comeback strategy centers on a few controversial moves:
- Another recent round of price increases, with the Standard plan now costing $15.49 per month.
- Launching advertisements “around the early part of 2023.” While the ad-supported tier would be somewhat more affordable, a decade ago Netflix’s revolutionary appeal was that you didn’t have to watch ads.
- An “extra home” fee — about $3 a month — for users who share their account with people they don’t live with.
With more and more competition in the streaming space (and more Netflix shows getting canceled), can the OG save itself while aggravating its own customers?
It’s Not a Case of Simple Greed
Bringing in commercials will cost Netflix a lot — at first, anyway. They will share a percentage of revenue with Microsoft, which is building the digital ad platform. The streamer will also have to renegotiate its programming deals with studios in order to play commercials over licensed content; these studios will likely seek a premium of 15% to 30% over existing contracts.
The company is hurting now. Morale inside Netflix headquarters is reportedly at an all-time low. A few hundred employees — about 3% of the company’s total staff — were laid off in June.
Customers might love a “loss leader” pricing strategy during the growth stage, but as we’ve already learned from Uber and Lyft’s price hikes, eventually businesses (and their shareholders) expect to make a profit.
Will Your Ex’s Cousin’s Barber Get Their Own Subscription?
An estimated 100 million households currently use somebody else’s password, which is a gigantic source of lost potential revenue. That’s understandable, but why does the “extra home” charge feel almost punitive?
“They’ve had 12 years of looking the other way while they saw people share passwords,” one former Netflix employee anonymously told b. “This behavior shift won’t sit well with people because Netflix allowed this behavior at the outset.”
It remains to be seen how many current non-paying Netflix viewers will sign up to watch the final season of Stranger Things. However, in the company’s defense, even one new subscriber would technically be worth it (if they don’t lose two current ones, that is).
As the top dog of the streaming wars, Netflix has observed how upstart streamers — Hulu, Peacock, Apple TV+, HBO Max, and many more — have copied and expanded their breakthrough model. Perhaps it’s no coincidence that Disney+ is also now increasing prices and rolling out ads.
As unpopular as it might seem, introducing advertisements and a crackdown on freeloading might be the best (and only) way to keep this wagon on course.
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