Back on March 10, 1998, a new website called NetFlix.com rented the first DVD for the 1988 film Beetlejuice, directed by Tim Burton, in which Winona Ryder, then a teenager, played a role. Nearly 20 years later, Netflix has become the global leader in streaming services, Winona Ryder starred in her most iconic original series "Stranger Things", and Tim Burton also directed the first four episodes of Netflix's hit series "Wednesday" in 2022, with which Jenna Ortega became an overnight success.
Left: "Stranger Things" Right: "Wednesday"
These are just a few of the key moments in Netflix's growth from rising star to industry giant. Born in Silicon Valley and started as a rental DVD business, the company entered a stage of rapid growth with the American drama "House of Cards".
Now, a decade later, Netflix, as a streaming giant, needs to gradually adapt to its new role, and its biggest challenge is to hold on to the Iron Throne in a market that is more competitive than ever before.
Multiple measures go hand in hand
To defend its leadership, Netflix has pursued a series of long-term growth plans to support its core mission: attracting new users and encouraging existing users to watch on the platform on a regular basis. Under this strategy, Netflix embarked on a path it had never traveled before: Netflix, which had been insisting for years about not allowing sponsors to trespass on content, began introducing ads and using technology to crack down on members' password-sharing practices. In addition, Netflix has also tried to host live events, such as live streaming Chris Rock's talk show that became popular for being slapped at the Oscars, and holding the annual Screen Actors Guild (SAG) awards ceremony from 2024. At the same time, Netflix is also expanding its peripheral fields, and has carried out licensing, merchandise sales and live-action paid experience activities around series such as "Squid Game" and "Bridgerton".
Squid Game
Michael Nathanson, senior analyst at Moffett Nathanson, believes that Netflix is at a critical inflection point, and there are two questions that are critical to the company's growth in the short term: "Can Netflix accelerate revenue growth again by cracking down on password sharing and introducing advertising?" ”
Not long ago, Netflix introduced strong measures to maximize the economic benefits of its 232.5 million platform users. Meanwhile, the company's founder and co-CEO, Reed Hastings, took a back seat, with veteran Greg Peters taking over as CEO along with longtime content leader Ted Sarandos. In Sarandos' view, the measures are a "future validation" for an established company: "In ten years, people will be spending a lot of time watching movies, TV and playing games — I'm not sure what the order is, but I firmly believe that the business in these three areas will be important in the future." When I look at the games business, it seems to have a lot in common with what we do now—worldview, storytelling, and technological innovation. For Netflix, accelerating its gaming business came naturally. ”
After entering the next stage, how to break the ceiling when North American subscriber growth has stagnated will be the focus of the industry on Netflix.
Netflix's new monetization goals include introducing ad-supported membership tiers for lower membership fees, adding "extra membership" subscription options, and extracting more profit from blocking password sharing. It is too early to know whether these two initiatives will bring about positive change, and there are many pitfalls to them. In the advertising business, Netflix, which is still new to the advertising business, can't wait to start joining the advertising league. On May 17, Netflix introduced advertisers to its ad pre-sale business for the first time in New York, and plans to hold an offline event in June to promote its advertising service. However, due to the Screenwriters Guild of America starting a strike in early May, the event was cancelled at the last minute and held online.
Later this year, Netflix will officially shut down its DVD rental business, with the last DVDs shipped on September 29. Netflix, which started with this business, is now worth about $168.4 billion, far more than Sony, Warner Bros. Quest and Paramount. The DVD rental business, which has been in operation for 25 years, has steadily shrunk under Netflix's intention, with the ultimate goal of getting these customers to switch to streaming services. In 2022, Netflix's DVD rental business revenue was $146 million, down 20% from the previous year and accounting for only 0.5% of the company's total revenue.
Getting content right is key
Today, major Hollywood companies see streaming as the key to survival, and Netflix is undoubtedly the biggest player in the field. Disney, Warner Bros. Discovery, NBCUniversal and Paramount have been pouring money into their streaming platforms in recent years, but these platforms have not been able to escape the huge losses. While Netflix had been borrowing for years, it now has the highest number of global subscribers of any streaming platform and is generating the sizable and lasting free cash flow that Wall Street capital expected.
Current CEOs Ted Sarandos and Greg Peters have recently gone out of their way to assure investors that they will run the company steadily and limit spending in the face of macroeconomic uncertainty.
But even with the upside, Netflix, like other companies that produce content, has recently had to deal with a prolonged strike by the Writers Guild of America, which could disrupt content supply for months. Sarandos believes that "everyone has to go back to the negotiating table, and we have to solve the problem quickly." The strike lasts for a long time, bad for screenwriters, bad for radio networks, bad for film companies, bad for fans, bad for the industry as a whole. ”
While analyst Michael Naisanson has previously expressed skepticism about Netflix's business model, he now acknowledges that the company has reached a plateau of increasing profitability and that the writers' strike could ultimately profit Netflix, "at such times, the party with the most inventory in the library will be the ultimate winner." ”
Netflix's content budget in 2023 is about $16 billion, and it expects to increase to $17 billion next year. Ted Sarandos said it will focus on developing content across multiple genres, languages and audience tastes, "At the end of the day, Netflix is a content company, and getting content right is what matters. In the future, we will be more holistic in the release rhythm of content, and will try to intersperse similar content with each other. The good news is that Netflix now has enough content to back up the idea. ”
More than a decade ago, people shrugged off the idea that Netflix would become a Hollywood giant. One famous example is that in 2010, Jeff Bewkes, then CEO of Time Warner, spoke to the media about whether Netflix was a threat to the traditional film and television media industry, saying: "Would you believe me if I said that the Albanian army would soon rule the world?" I don't believe it anyway. Netflix co-CEO Reed Hastings is said to have worn the dog tag of an Albanian military dog around his neck as an incentive for a year after seeing the interview.
When it's 2023, according to Wedbush analyst Michael Packert, if Netflix's first-quarter results can continue this year, "the Albanian army is indeed going to take over the world." ”
Future growth challenges
But for the rest of 2023, Netflix will still face a lot of tricky problems.
First, it has to deal with a weak advertising environment, and Jessica Reif Ehrlich, a media analyst at BofA Securities, noted that Netflix's advertising business may not have a meaningful impact on revenue statements until 3-5 years. "Netflix still has a long runway ahead, but it's a strategy they've had to choose for long-term growth."
Sarandos emphasized that Netflix's decision to introduce ads was to further "expand the market" to include consumers who would rather watch ads for cheaper dues. So far, there aren't many cases where existing users have downgraded their plans.
Another factor that is highly variable is how effective the fight against password sharing really is.
Netflix originally planned to launch paid sharing in a few markets, including the United States, by the first quarter of this year, but this plan was later postponed until the end of June. Under Netflix's new measures, the primary holder of a household account can add access to a member outside the household for an additional fee, while unauthorized users will not be able to log in. According to previous estimates, more than 100 million households have illegally shared access to their accounts, and it is clear that Netflix hopes to generate an additional income from these crypto-proliferating users.
On the content side, Netflix is committed to launching more live events, and Sarandos believes that such programming is just as important as reality TV, "which is an entertainment category that we are investing heavily in." However, Netflix's much-hyped "Love Is Blind" season 4 reunion live broadcast had a major accident. On April 16, the live broadcast window could not be activated due to a technical failure - Netflix's technical engineers tried to enhance the performance of the fourth season reunion live broadcast of "Blind Audition" after streaming Chris Rock's talk show special, but the live broadcast window directly collapsed due to millions of fans flocking to it. Sarandos laughed at himself, "It was good to be a sensation in the early days, but it's not anymore." ”
"Purple Heart Love"
Netflix also doesn't plan to cut budget spending on original content anytime soon. While traditional Hollywood studios have begun to talk about Netflix's rising influence in the film and television industry, Sarandos insists that works on streaming platforms don't need to be released in theaters to have a cultural impact. Citing the success of last year's romantic comedy "Purple Hearts," he called it a "hugely impactful production" in terms of viewing time on streaming platforms, stressing that it didn't have to be a $200 million movie that would attract audiences: "Netflix can replicate that success, and we need to highlight the heartwarming experience of letting users sit around in their living rooms." ”
Netflix still wants its movies to go directly to streaming, because that's how users like it. Similarly, there is the strategy of launching the series for the entire season at once. Sarandos said, "Maybe the traditional four or five months to finish a series is a better business decision, but for us, the model that respects the user's wishes is the best model, and we have to give them what they want most." ”
Part of the picture: Douban
Please send your submission to your email: