Source: Visual China
Author 丨 Zhang Rui
Editor 丨 Kang Xiao
Produced by 丨Shenwang Tencent News Xiaoman Studio
In the first quarter, no blockbusters ran out, the game business was still in the "burning money" stage, the first time in 10 years suffered a decline in paid users, net profit fell year-on-year, and global video streaming giant Netflix (Netflix) "can't fly" this year.
Capital markets are always the most responsive. Affected by Netflix's unsatisfactory performance in the first quarter of 2022, Netflix's stock price fell by $89.93 per share after hours, a decline of 25.8%.
How bad is Netflix's first quarter 2022 earnings data? In the quarter, the company's revenue was $7.87 billion, up 9.8% year-on-year, but less than analysts had expected at $7.95 billion, and net income was $1.597 billion, down 5.9% from $1.707 billion in the first quarter of last year, according to the earnings report.
In terms of user growth, the total number of Netflix global paying users in this quarter was 221.64 million, an increase of 6.7% over the same period last year, but the number of paid users decreased by 200,000 compared with 221.84 million in the fourth quarter of 2021.
For the loss of paying users, Netflix explained in the financial report that it is mainly related to its suspension of services in Russia and the rise in membership fees.
According to the financial report, Netflix suspended its services in Russia this quarter, reducing the number of paying users by 700,000 in the quarter, which also led to a decrease of 300,000 paid users in Europe, the Middle East and Africa. Excluding this impact, the global paying subscribers would have been expected to increase by 500,000.
In addition, in January 2022, Netflix raised prices again, with the basic subscription increasing from $8.9 to $9.9 (about 62.96 yuan) per month, the premium subscription price supporting 4K resolution to $19.99 per month, and the standard subscription price supporting HD resolution and two terminals from $13.99 per month to $15.49. Affected by the price increase, Netflix lost more than 600,000 paying users in the United States and Canada.
The picture shows TheVerge's statistics on the price adjustment of Netflix members since 2015
For the loss of paying users, Netflix only explained half of it. The price increase is only a symptom of its user loss, and the lack of continuous output of explosive content is fundamental. In the increasingly "pipelined" long video track, the focus of paying users is only on what they can see after spending money, not on the platform itself.
Netflix's multiple price increases before 2021 didn't stop the growth in its paid memberships. "The essential question is whether there is a set of effective ways to create explosive content, and a truly high-quality content platform can also go through the cycle," an online video practitioner told Deep Web.
There is no explosion after "Squid"
For long-form video platforms, blockbusters have always been the main force in pulling new paid members. In the first quarter of 2022, Netflix was obviously weak in launching explosive content. "Deep Net" sorted out Netflix's financial report and found that this quarter can make Netflix "proud" and announce the length of time watched by global users in the financial report.
In terms of TV dramas, in the first quarter of 2022, Netflix focused on three TV series, "Bridgetown Season 2", "Fictional Anna" and "Zombie Campus", of which the first two were watched for 627 million hours and 512 million hours, respectively, and the three non-English non-English dramas "Zombie Campus" and "Squid Game" and "Banknote House 4" had a total of 561 million hours of viewing time.
In terms of movies, Netflix only disclosed in the earnings report the viewing time of the movie "Adam Project", which was 233 million hours.
Perhaps it is a lacklustre tv series and movies that can disclose the length of watching, and Netflix also disclosed the viewing time of the more unpopular documentaries this quarter. This quarter, Netflix launched the documentary Tinder Swindler (Fraud King), which was viewed globally for 166 million hours. For this documentary, Netflix said, "This is the most 'great' documentary of Netflix in history."
In terms of global user watch time alone, the most outstanding show in this quarter was "Bridgeton Season 2", which was watched for 627 million hours. However, compared with the viewing time of the drama launched by Netflix in the fourth quarter of 2021, "Bridgeton Season 2" is still difficult to meet the standard of blockbusters.
Judging from the number of plays and the length of viewing time, the fourth quarter of 2021 can be described as a quarter of Netflix's "full of achievements". This season, "The Witcher", "You" ("Sleeping Bookstore"), "The Maid", "Squid Game", "Don't Look Up", "Red Notice" and other content have performed well. Among them, the "Squid Game", which was released in the third quarter of 2021 and exploded in the fourth quarter, has set a new high for Netflix's new users.
According to some data, "Squid Games", which was launched on September 17, 2021, ranked first in 94 countries around the world, and 142 million family members around the world watched it in the first month of its launch. Reflecting on the growth of users, Netflix received 8.28 million new paying users in the fourth quarter of 2020, and from the first quarter of 2021 to the third quarter of 2021, Netflix's new paid users were only 3.98 million, 1.54 million, and 4.38 million.
In the first quarter of 2022, Netflix pressed the blockbuster on "Zombie Campus". Don Kang, Netflix's vice president of Korean content, said publicly at the beginning of the year, "Squid Games remains the most viewed series ever on the platform, and 95% of the audience comes from outside Of South Korea." To this end, Netflix plans to launch more than 25 Korean dramas this year, including "All of Us Are Dead" and a "House of Paper Money" adapted from the popular Spanish crime drama, hoping to replicate the success of "Squid Games".
However, from the perspective of viewing time, "Zombie Campus" did not reproduce the popularity of "Squid Game", and Netflix did not even announce the viewing time of "Zombie Campus" separately in the financial report.
In the first quarter of 2022, the explosion that did not run out of the level of "Squid Game" is the root of the loss of Netflix's paid users. Netflix expects another 2 million fewer paying subscribers in the second quarter of 2022.
"High-quality web dramas are the key to the traffic conversion and membership scale of video platforms. These super web dramas, if they are online for 2 episodes a week, their influence can last for 2-4 months, which means that the long video platform can make the influence throughout the year through 4-6 high-quality super web dramas and continue to attract paying users," said Huang Guofeng, senior analyst of Analysys Internet Entertainment.
Judging from the global viewing time of "Squid Game" that Netflix is still announcing this quarter, this blockbuster drama that has been popular for more than half a year is still attracting paying users for Netflix.
However, the long video service itself is like a pipeline, the user's focus is on the content itself, and the platform loyalty is low. The trend of "pipelined" long videos has made Netflix, which has a single income, walk on thin ice. Capital markets and investors are more concerned, if the growth of paying users stagnates, what does Netflix rely on to maintain performance growth?
The betting gaming business is still burning money
Judging from the personnel changes and acquisition trends of Netflix in the past year, the game has become the second growth curve of Netflix's bet.
In July 2021, Michael Verdu, a game business executive recruited from Facebook, was appointed vice president of Netflix game development, responsible for Netflix's game development department. Two months later, Netflix acquired game developer Night School. In November of that year, Netflix launched a mobile game app on Android and iOS, and Netflix members can discover and launch games in the Netflix mobile app. According to Netflix's financial report, by the end of 2021, Netflix has launched a total of 10 games.
In early 2022, Netflix acquired game studio Boss Fight Entertainment, which was founded in 2013 and previously released the role-playing mobile game Dungeon Boss and the betting game myVEGAS Bingo. In addition, Netflix revealed in its latest earnings report that the company will acquire Helsinki-based game company Next Games. According to the media, the acquisition price is $72 million, while According to Techcrunch, Next Games's revenue in 2020 is 27.2 million euros.
Commenting on the acquisition, Michael Verdu said, "Next Games has an experienced management team, excellent results in mobile gaming, and solid operational capabilities. We are delighted that Next Games has joined Netflix as a core studio in strategic areas and key talent markets, expanding the capabilities of our in-house game studios."
However, in terms of revenue, Netflix's game is still in its infancy. At present, Netflix does not charge additional fees to paying users for launching games, nor does it have built-in ads in the game. For Netflix, the current game business is more like providing some added value to paying users in the video business.
In addition to the game, Netflix will also develop derivatives of well-known IP. For example, Netflix once worked with Walmart to sell T-shirts, hats, mugs, notebooks, etc. for the character numbers in "Squid Games".
However, compared with Netflix's quarterly membership fee revenue of more than $7 billion, the revenue that games and IP derivatives can bring to Netflix is not worth mentioning. Netflix co-CEO Reed Hastings has publicly stated that "Netflix will not rely on features like games or consumer goods to generate separate profits."
Just because you don't generate profits from games or consumer goods now doesn't mean you won't in the future. Netflix executives posted at the earnings report in the second quarter of 2021 that "games can become a new source of revenue for the company." However, judging from the current progress of Netflix's game business, relying on game revenue is still a distant thing. At present, the thing Netflix has to solve is how to ensure the growth of paying users and the attack of many players such as Apple, Disney, Hulu, Amazon Prime, HBO and so on.
Apple, Disney and other "wolves around"
Among the many competitors, the "rookie" Apple TV+ first gave Netflix a fatal blow.
In March 2022, at the 94th Academy Awards, the original feature film "CODA" produced by Apple TV+ became the first Ever Streaming Original Oscar Best Picture. Prior to this, Netflix's original film has been nominated for multiple Oscars for three consecutive years, but it did not happen, but this laurel was "cut off" by Apple TV+.
In the field of streaming, Apple TV+ is a latecomer. Apple only launched Apple TV+ in 2019. At that time, in order to seize users, Apple TV+ focused on a free strategy, providing free services for users who purchased Apple products (iPhone, iPad, Mac) for up to one year.
Although Apple did not announce the paying users of Apple TV+ in its earnings report, data shows that Apple TV+ has about 12 million paying users in the United States, and Apple TV+ will contribute about $2.2 billion in revenue to Apple in fiscal 2021.
The up-and-coming Apple TV+ is just one of Netflix's many competitors. Netflix analyzed the market share of multiple streaming media in its first quarter 2022 earnings report. In February 2022, Netflix had the highest market share, rising from 6% a year ago to 6.4%. Followed by YouTube, Hulu, Prime Video, Disney+, etc.
Although from the perspective of market share, Netflix is still leading, but from the perspective of the market share of only 28.6% of the main players, there are still variables in whether Netflix can continue to maintain the first market share. In addition, as content providers such as Time Warner and Disney and IP copyright owners build their own platforms and reclaim copyrights, Netflix loses a lot of high-quality content. For example, "Friends" and "Gossip Girl" returned to HBO, "Office" settled in NBCUniversal's Peacock, and "Fairytale Town" returned to Disney+.
"For video platforms, in a non-monopoly state, burning money to fight for content is the only way. More than forty years ago, several major pay limited television stations in the United States were like this, and today Netflix, HBO MAX, Amazon, Apple, Disney+ are playing a new content war. Joe, a film and television producer who has worked with Netflix many times, said.
Burning money isn't fundamental, the key is to burn out truly engaging content and use it to attract more paying users. In order to recreate the blockbuster, Netflix bet on the well-known science fiction novel "Three-Body Problem". According to foreign media reports, the English drama of "Three-Body Problem" began filming in November last year, and actress Aisha Gonzalez revealed in an interview that the filming period was 10 months.
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