* Text/Spades with long sword
What does an Internet company that focuses on subscription and membership go downhill at the business level?
Shrinking costs inwards seems to be a broader option, such as layoffs, streamlining unnecessary expenses, and stricter attendance mechanisms, as we've already seen in some companies in the country; of course, others tend to opt for the second option — imposing a "more stringent attendance mechanism" on the subscription system on which it survives, with the intention of squeezing out the maximum economic value of each customer.
Netflix is one of the companies that has chosen the second path. The streaming giant issued a warning on April 20 that it plans to crack down on account sharing around the world, including the use of shared passwords to watch videos with "family" and "friends".
At the beginning of the year, Netflix had already implemented this method in South American countries such as Chile, specifically setting additional fees for sharing behavior, ranging from $2 to $3 per additional user. As for how to curb account sharing widely around the world in the future, Netflix did not disclose more news, but only hinted that "there may be big changes in 2023."
Of course, the domestic and foreign wool parties who are good at drilling the loopholes in the subscription are very clear that the so-called "family" and "friends" who use the shared password with them may be netizens who just met in the carpool group two minutes ago, or even did not have a face. And it's these people that Netflix wants to hit.
According to the data given by Netflix, there are more than 30 million "households" in the US and Canadian markets alone who use shared passwords to enter and watch videos, and if the scope is expanded to the world, this number is likely to rise to 100 million - these invisible users who use Netflix services but do not pay money are almost half of the number of Netflix subscribers.
If Netflix's growth rate is as rapid as in previous years, it may also turn a blind eye to these account sharing behaviors, however, as mentioned earlier, the current situation is extremely unfavorable to Netflix - in the first quarter of this year, Netflix's global subscribers fell for the first time in more than a decade, a net decrease of 200,000, completely less than analysts expected.
On the other hand, Netflix's revenue and net profit in the first quarter of this year also fell short of analysts' expectations, the former up 9.8% year-on-year to $7.87 billion, but analysts' expectations were $7.95 billion; the latter was $1.6 billion, down even 5.9% year-on-year. At the same time, Netflix's operating costs have increased significantly, from $3.869 billion last year to $4.285 billion.
“...... For years, we wanted to establish a consumer-friendly image, but now things have changed. Reed Hastings, co-CEO of Netflix, said in the earnings report, "As growth stagnates, the company's attitude also needs to change." ”
It is undeniable that Hastings has a glorious past, he once led Netflix to transform four times in two decades, and finally successfully became one of the great powers of Silicon Valley. But we also have to admit that there are always times when humans make ineffective decisions and make mistakes, such as this campaign against the Wool Party – can it really alleviate Netflix's growth dilemma? I am afraid that this is still debatable.
At present, Netflix's total global subscriber base is 221.64 million, and it is still the undisputed hegemon in the streaming media field. But on the other hand, other streaming platforms are also picking up the pace, competing for market share that is not yet controlled by Netflix.
HBO Max is a typical example, backed by Warner Media, it includes "Superman", "Batman", "Game of Thrones", "Harry Potter" and other heavyweight IP, Warner Media and Discovery Media Group (Discovery) merger, it will also include the Discovery Channel. As of the end of last year, HBO Max and HBO Channel had a total of 73 million subscribers worldwide, an increase of 1.3 million in the fourth quarter of last year.
In addition to HBO Max, the most valued opponent of Netflix should be Disney's streaming platform Disney+. The latter's IP library is also huge, including the Marvel series, The Star Wars series, the Disney Live-Action + Animated Series, and the Pixar Series. In terms of subscribers, as of the fourth quarter of last year, the total number of subscribers on its platform has reached 118.1 million.
Whether a streaming platform can continue to attract users, content is an important factor, and in terms of content, Netflix is very different from HBO Max and Disney+.
Overall, Netflix's content tone is more hardcore and niche, such as House of Cards, Stranger Things, Black Mirror, and Love, Death, and Robots, which are some of its proudest works in recent years, but their content is more adult, dark, realistic or absurd. With the first-mover advantage of streaming media, after mining existing users in the part of the field to which it belongs, it is very difficult for Netflix to expand new users in other directions.
In contrast, HBO Max and Disney+ have a wider IP audience and overall positioning for all ages, which is why Disney+ has more than 100 million users worldwide in the past few years since its launch - it fits the tastes of most viewers, not a small part. At the same time, after Netflix raised the price once last year, HBO Max and Disney+ have an advantage over it in terms of subscription prices.
It is conceivable that if Netflix must crack down on those "family" users, those who are not very loyal to the content are likely to flow to other streaming platforms, rather than obediently registering an account to pay Netflix as Hastings imagined. In the end, Netflix's purge may only be to make a wedding dress for others, and if you want to retain users, Netflix still has to start from somewhere else.
On the one hand, showing more inclusiveness in content production and improving the cost performance of the subscription system are the directions that Netflix should strive for.
In recent years, Netflix has indeed made breakthroughs in content, such as the intensive launch of new anime in Japan and the launch of more popular content in South Korea; in addition, the improvement of the subscription system has also been put on hastings' agenda, and the CEO who has always resisted advertising publicly claimed on Tuesday that Netflix is now open to "low-cost subscription services supported by ads". If Netflix fills the void with these initiatives while slowly removing the "wool party," it still has some promise in terms of user and revenue growth.
Another of Netflix's more adventurous decisions is to launch a game business, after it has successively acquired game studios such as Night School Studios and Next Games, targeting game subscriptions, interactive narrative works and mobile games.
Of course, Netflix has no previous experience in making games, which means that it must constantly invest money to acquire game studios, and it must also balance the game studio's dominance of content and the process of "movie-game linkage". In the next few years, it will pay a lot of costs for these strategies, and once it goes wrong, it may eventually repeat the failure of iQiyi in the "movie-game linkage".
*Image from Yandex, corporate earnings report