Netflix knows that it has to be profitable and solvent. It paved the way in the streaming market and its only line of business is this: producing and acquiring content and charging a monthly fee to its customers. It cannot operate as a deficit whim like the services of Amazon or Apple, which have the mattress of their parent companies, with bulging accounts. But in her determination to stay financially, she has unleashed an image crisis that goes beyond the subscriber stagnation of the spring of 2022 and, in reality, it is difficult to understand how she has gotten into the situation on her own.
To understand the gale, a little context. Netflix had announced that it would gain 2.5 million subscribers in its first quarter of last year but, when having to announce the results to shareholders, they got a surprise: it had gone from having 221.81 million subscribers to 221.64 millions. The stagnation of a platform that, unlike its rivals, did not operate in red numbers was confirmed. And, given this prospect of lower growth, he focused his attention on the monetization of each user.
Wall Street, in fact, had been looking in this direction for some time. If at the beginning the stock market had given more importance to the volume of subscribers of each streaming service, it soon discovered the pitfalls of this measuring stick. What good was Disney having a stellar launch if customer fees didn’t even joke cover the costs of producing the Marvel and Star Wars series? And how was it not recognized that Netflix retained its subscribers despite offering more expensive prices than its direct competitors, such as the loss-making HBO Max?
The viability of Netflix, therefore, is not in doubt: it has its accounts under control, its operating profitability, and, just in case, it takes measures to increase its profits. Here comes, for example, the decision announced a year ago to develop a cheaper subscription with ads, and which was implemented in record time: in October the content was already offered to potential customers for $6.99 in the United States and in December it was available in Spain for 5.49 euros.
Netflix’s entry into the advertising world, which was expected to be complicated, was made possible in record time by its alliance with Microsoft to develop all aspects related to this modality, which would allow them to grow in saving users, who want content but at the cheapest price. “We’ve left out an important segment of consumers, the people who say, ‘Hey, Netflix is ??too expensive for me and I don’t care about the advertising,'” Ted Sarandos explained in Cannes.
It was the first time that the streaming giant had contradicted one of its almost founding principles. The media still remembered the statements of Reed Hastings, co-founder of the company, in 2020 when he said that they were convinced that they could “build a better business, a more valuable business without advertising.” He considered, in fact, that it was complicating his life because “the advertising market does not grow” but rather “decreases”.
The contradiction in the ads, for the record, was an anecdote. A company can change its mind and line of business. The error came with the decision to charge an extra fee for additional account users, not so much because of the additional cost but because of their way of communicating the decision to customers.
“We’ve always made it easy for people living under one roof to share their Netflix account with features like profiles and multi-screen viewing. While they’ve been hugely successful, they’ve also caused some confusion about when and how you can share it”, they published on their website.
The Netflix user had always assumed that the different subscription modalities were made to share with people outside the main household and, suddenly, the company said that it was a misunderstanding. But was it believable? No. In 2017 they had literally published that “love is sharing a password.” And, their rates, were understood as shareable: the standard allowed two profiles to be connected to the catalog at the same time and the premium allowed four.
After allowing users to share their accounts for years thanks to higher rates, even incentivizing it, Netflix gaslighted these same customers, telling them that they had not understood anything. I repeat: it is possible to change the business model, to monetize the user experience, but the communication exercise could be improved, especially in a company that, at the level of social networks, has always wanted to show itself as close, almost like a colleague.
And, once Netflix takes the step of charging more to (distanced) families and various friends, the time comes to justify the increase beyond monetizing the subscriber. As? Giving promotional priority to Soy Georgina, the reality show focused on Georgina Rodríguez, which premieres its second season this Friday.
A spear can be broken in his favor: the frivolous and creatively controlled production by its protagonist has a powerful start with the honest statements about the loss of his first child. And, in the case of Netflix, the most common thing is to launch the news in its catalog with hardly any promotion, except for those that, after analyzing the data, they see as being more profitable. But are the 12.99 euros per month and the 5.99 euros for an extra user justified with this kind of content?
Netflix first wanted to attract attention with high-profile, quality series, and wants to win the Oscar for best film, an award that eludes it despite the good performance of films like The Power of the Dog, Rome or All Quiet on the Front. . But, since its objective has more to do with being the main source of entertainment in the domestic market, even usurping the title from conventional television, its priority is not only to reinforce its commitment to quality.
Its higher price tag is at odds with the promotion of mainstream content, which often doesn’t even aim to be particularly good beyond banal entertainment. The cancellation of unfinished fictions such as 1899 does not help either. While waiting to discover if his subscriber base suffers from his latest offensive to the client’s pocket, a crisis may be brewing: that, by trying to be everything, stop justifying its price.
What good is so much production if so much of the volume is perceived as filler by the subscriber? Will there be a moment in which the Netflix monthly payment will be stopped directly in favor of paying two rival services with less production but more attention to the development of their products? And is that… does seeing content from a platform, especially if it is by inertia, mean being satisfied?
