The Netflix earnings slump

After a decade of rapid growth, Netflix took a tumble over the past quarter, for the first time losing more subscribers than it signed up. Wall Street’s reaction has been swift, with the market slashing Netflix’s valuation to less than half of its value from a few weeks prior.

Many schadenfreude-fueled takes revel in watching the king of streaming take a hit, but Netflix’s downturn won’t improve film watching habits or shake up streaming’s ascendance. The availability and discoverability challenges on streaming – clunky user interfaces, ruthless algorithms – won’t improve. Mega budget streaming sites will survive. What will change are the type of shows and movies that streaming sites buy, produce, and green light going forward.

That’s because the Netflix downturn marks the end of what I’d call the streaming content expansion era. As little as a few weeks ago, the megacorp streaming playbook (HBO Max, Paramount+, Disney+, Apple TV+) was simple: generate as much exclusive content as possible, trust in the algorithm, and as long as the tail of content is big enough, subscribers will continue to roll in. It’s a strategy that favors wide over deep, bankrolling an eclectic mishmash of content to serve all four quadrants under one roof. Cooking shows, reality TV dating, prestige Oscar bait, nature documentaries, and more stay under the same brand for subscriber growth.

Netflix, and in turn, all of their deep pocketed upstart competitors, approached competition through the lens of a mega tech “winner take all” approach. Companies like Meta, Google, and Apple enjoy enormous control over consumers; who’s to say a single entertainment entity can’t do the same? Watchers have limited time and budget. Ensure you’re their top choice or two with every type of programming they want to watch, and churn will stay low while revenue skyrockets.

Netflix’s subscriber drop illustrates the fallacy of the content expansion strategy. Competition today is fierce. There are too many places for subscribers to get high quality movies and TV shows in return for a low monthly fee. Some of the most desirable content can’t be carbon copied; a competitor will always have a leg up somewhere. Peacock has The Office, Friends, and Parks and Recreation, and no modern show to date can challenge each show’s distinct appeal. HBO has a certain cache with its high budget TV dramas like Succession. Also, unlike other forms of technology, streaming creates virtually no lock in effect for consumers. Subscriptions are generally month to month; watchers can watch what they want, cancel, and move their budget to another service anytime.

In this new era, what I’d call the content perspective era, competition derives from TV shows and films that serve a point of view to attract a targeted audience. Algorithms can help, but in the end, each service needs to produce must see content for that smaller audience instead of hit or miss content for all.

The big players will shift new funding to what already works. Netflix will likely invest in more mainstream IP hits like Bridgerton, Lupin, and Stranger Things. Paramount+ will lean on sci-fi, both classic (Star Trek) and new (Halo). Peacock has 90s normcore nostalgia with NBC’s heavily syndicated TV lineup. Apple TV+ looks like it will carve out a niche like classic HBO: a smaller set of critically acclaimed TV shows and movies that relies more on curation than the algorithm. Disney+ sticks with broad family fare through Marvel and Star Wars, while HBO continues to produce adult focused dramas.

Small streaming services like Shudder, the Criterion Channel, and MUBI don’t need as big a shift in direction. They have embraced a content perspective strategy from the start, less by choice than the necessity to stand out and survive on a comparatively minuscule budget. Each has a focused audience with a targeted library that the big players have little interest in matching. For instance, there are horror films on the edges of Netflix and Hulu, but without the vast selection available on a service like Shudder. Many famous older movies are available on the TCM archive within HBO Max, but it pales in depth compared to options on the Criterion Channel.

I have mixed feelings about the transition from the content expansion to the perspective era. On the one hand, less massive properties gobbling up content across every genre gives room for smaller, riskier platforms to stand a chance. But when I see the biggest streaming sites rebalance, I suspect it will be in a watered down, creatively safe direction. Netflix, HBO Max, and the rest become less like rebels bucking trends and more like the establishment with programming typifying cable and broadcast TV.

I worry more daring TV shows and movies will be the first to get cut from the lineup. The days of Netflix green-lighting off-kilter miniseries like Maniac or HBO Max betting big with the elliptical Station Eleven and the streaming debut of Drive My Car may be over. New ideas that don’t sell to revenue generating audiences get pushed to smaller sites or disappear entirely, harming nonconformist TV and film’s general discoverability and availability.

Ironically, for all the discourse in recent years about streaming evolving past cable – no bundles, no ads, binge a season in one sitting – the streaming landscape may be reverting to decades old standards. Instead of looking to an uber site like Netflix or Disney+ for everything we want, we’ll have to juggle many services, sit through ads to make the experience affordable, and look through confusing online guides for more daring content. It’s the cable bundle for a new era.