But instead of filling out the catalog, Netflix is trying to diversify beyond video. Like, for example, strengthening the staff of the gaming service it launched in November 2021. “They’re going to put money into rambling across different types of content to be a four-quadrant service as much as possible,” says Alexander, meaning they’re targeting not just men but women, and not just those under 25, but also on people over 25. “But at the same time they are aware that the competition is stronger than ever at the moment. They need to find a way to be Netflix again and figure out how to revolutionize parts of this industry.”
But that costs money. That is why price increases have been implemented in large parts of the world. “From an analyst standpoint, SVODs are still value for money even with a price increase,” Gunnarsson said. “You can watch as much content as you want for two pints in a pub and have unlimited access to all that content.” According to Omdia, households in the UK subscribe to two services on average: half the amount in the United States. For now, Netflix, like Amazon, is seen as an anchoring service — a service that users constantly have, knocking out other, smaller competing services when they can afford it. “Netflix is the default streaming service,” said Andrew A. Rosen, founder of streaming insights consultancy Parqor. But that can always change.
With 75 million households subscribed to Netflix in the United States, Alexander believes the service is close to its peak in the country when it comes to adoption. “What you’re really trying to do at that point is re-engage with customers who may have had to subscribe to Paramount+ for a month or so,” she says. Original content on Netflix, while some may find it disappointing, broadly falls into two categories: the reality TV and kids’ entertainment that keeps existing subscribers happy, and the big action, drama, and sci-fi shows that subscribers who run their businesses. have taken over, re-apply elsewhere. But expired subscribers are relatively rare for Netflix, Rosen says: “Their market churn in the US is about 2.2 percent,” he says. “Hurn churn is low.”
And while there’s still plenty of room to grow in other markets, those users tend to monetize Netflix and other streaming services less per customer than they do in the US, UK or elsewhere. Average revenue per customer for Disney+ Hotstar in India, Brazil or Mexico is about $1.06, Alexander says, compared to $6.13 in the United States. “It’s a huge difference when you consider tens of millions of subscribers,” she says. And to make the extra money out of a market when subscriber growth slows, like in the US and UK, you have to start raising prices.
Still, the challenge remains that raising prices at a time of macroeconomic uncertainty is a risky business. Rising gas prices, higher home heating costs and pressures on living standards from runaway inflation are all impacting discretionary spending, especially streaming video providers. But there’s another way to make money while maintaining and building customer numbers: tiered, ad-supported services. In June 2021, HBO Max launched an ad-supported, stripped-down version of its streaming service with a $5 discount off the full product at $14.99 per month. Disney+ will launch an ad-supported tier later this year, alongside Peacock, Paramount+ and Discovery+. “Logically, common sense dictates that competition will drive more streaming services towards a hybrid AVOD [advertising-based video on demand]/SVOD model,” says Gunnarsson.
This post Netflix struggles to keep its place in the streaming wars
was original published at “https://www.wired.com/story/netflix-reckoning”
