Why can't Netflix do it?

Following the thunderstorm of the last financial report, Netflix's latest financial report was once again a big surprise, the global net paid users decreased by 200,000, which was the first time in 11 years that net subscribers did not increase but fell, while the company was expected to add 2.5 million and the market was expected to increase by 2.73 million.

Due to disappointing performance, Netflix plunged more than 25% after hours, and the stock price fell at $260, the lowest in more than three years since the end of December 2018. When last year's four-quarter report was released in late January, Netflix also plunged 25% after hours. What's even more frightening is that Netflix's stock price has plunged by 42% this year, far exceeding the nasdaq 100 index's decline of about 13%.

Two consecutive quarters of financial report thunderstorms, to the investors in the heart of a big question mark: Netflix is not ok?

In general, users are the lifeblood of streaming platforms. Today, Netflix, as a global streaming platform giant, does its user performance mean that the number of users in the entire streaming media industry is about to peak, and will streaming media collectively encounter mudslides?

After Netflix's earnings report, shares of other streaming companies fell in after-hours trading.

Among them, Roku, one of the most popular streaming platforms in North America, once fell more than 8%, Disney, fuboTV fell more than 5%, and other media companies such as Warner Bros., Paramount and Spotify Technology SA also fell.

The traditional platform has entered the game, the new platform has risen, and the robbery war has become more difficult

For the past decade, Netflix has been a leader in streaming. However, with the entry of traditional platforms and the rise of new platforms, competition in the streaming media field has become more intense. Disney, HBO, Paramount, Peacock, Apple, Amazon and more competitors are all following in Netflix's footsteps.

These competitors not only compete with Netflix on new projects, but also take back much of the content that once ran on Netflix.

In January 2020, Warner officially withdrew the divine drama "Friends" from Netflix, and launched it on Warner's own streaming platform HBO Max 5 months later.

Mobile smart platform App Annie data shows that on the day of the premiere, HBO Max downloads increased by 30% from the previous day, making it a 10-place increase in the ranking of non-gaming apps on the IOS and Google Play platforms.

The veteran comedy "The Office" is currently playing on NBC Universal's Peacock streaming platform, and Disney has taken back all of its content running on Netflix from its streaming platform Disney+.

The expansion of the range of alternative platforms is bound to lead to user dispersion.

Netflix said in its earnings report that while competing with competitors such as YouTube, Amazon, Hulu, disney +, etc., more and more traditional entertainment companies have begun to enter streaming services, resulting in the loss of some users and revenue from Netflix.

Probably intimidated by the decline in subscriber numbers for the first time in more than 10 years, Reed Hastings, Netflix's chief executive, who has always opposed adding commercials and other promotional content to the platform, announced on an earnings call that Netflix would begin offering low-priced but interstitial subscription services.

"Those who follow Netflix know that I've always been against complex advertising and very much like simple subscription services," Hastings said. "I love that, but I prefer consumer choice, and it makes sense for consumers who want lower prices and aren't averse to advertising to get what they want." But Hastings said the service could not be achieved in the next year or two.

However, Netflix is still a step slower.

In early March, Disney, which had also hated such services, announced that from the end of 2022, Disney would introduce "Disney+" into the global online video market, with cheaper tariffs, but would insert ads.

In fact, membership services that offer interstitial ads are becoming a trend in the streaming space. Before Disney, Platforms such as Warner Media, Paramount, NBC Universal, and Discovery (now merged with Warner Media) launched affiliate products with interstitial ads.

At a time when these platforms are launching interstitial ad membership services, there are also streaming platforms that are investing in free subscription services. Last week, Amazon ramped up its investment in its ad-backed IMDb TV free streaming service, renaming it Freefee, highlighting its free properties and announcing plans to expand its programming budget.

There are no eggs under the nest

Netflix follows other streaming media to grab users with low-cost interstitial advertising membership services, reflecting fierce competition on the one hand, and reflecting that consumers' ability to pay is declining on the other hand.

Kelly Metz, managing director of premium TV activation at advertising giant Omnicom Media Group, said the emergence of streaming ads "is ultimately good news for U.S. consumers who can't sustain a paid subscription as well." ”

"There's an upper limit to the actual affordability of U.S. consumers, like we've seen cable TV in the past."

In its letter to shareholders, Netflix also pointed out that the sharp slowdown in revenue growth is partly due to the general environment.

"Macro factors can also have a negative impact on Netflix's revenue, including geopolitical events such as weak economic growth, rising inflation, the Russian-Ukrainian conflict, and the continued disruption of the COVID-19 pandemic."

Netflix blamed part of the reason on the environment, which inevitably threw the pot. However, the data shows that Netflix's core market, the United States, is facing the highest level of inflation in more than 40 years, and the high price of food and energy is bound to further affect the purchasing power of ordinary consumers as the Federal Reserve accelerates its "water collection".

Even if you can't afford to eat, how can you still have spare money to buy video memberships? The analysis pointed out that Netflix may have been less than expected for three consecutive quarters of subscriber growth, indicating that subscriber growth is entering the platform period, especially in the US market, and Netflix's first quarter subscriber decline is the largest in its history.

This is also confirmed in the UK market.

According to market research agency Kantar, UK consumers cancelled around 1.5 million video subscription accounts in the first three months of the year, a record level.

Rampant account sharing

The increasingly rampant sharing of accounts has become a major problem for Netflix.

For consumers, by sharing accounts, consumers have the opportunity to enjoy the services offered by streaming platforms at a lower price, or even without spending money. But for the platform, this behavior is tantamount to "stealing".

In addition to the 222 million paying households, the company estimates that more than 100 million additional households are sharing accounts with existing users, including more than 30 million households in its core market, North America, according to data provided by Netflix on Tuesday.

In a letter to shareholders, Netflix admitted that it deliberately indulged in extra-family account sharing because it could make users addicted to the service. But now that the competition is getting fiercer, Netflix wants to pay for it from families who use shared passwords.

Netflix warned of cracking down on account sharing around the world, suggesting that there could be big changes as soon as 2023.

Netflix said it was already testing projects that would convert some viewers into paying viewers, calling it "a huge short- to medium-term opportunity."