A couple of years ago, Netflix seemed to be too big to fail. While there were a few other streaming services out there, none came close to the sheer amount of content and goodwill. They had tons of amazing licensed series under their watch and had the foresight to dump billions and billions of dollars into original content, hopefully future-proofing their company.
But here we are. The year is 2019, and later this year, Disney+ will enter the arena. Furthermore, their contracts with WarnerMedia, Disney, and NBC Universal are nearing their end, meaning that shows like Friends and The Office will be leaving. And let’s be real, as much as Netflix touts their original content, a lot of audiences stick around for the licensed stuff.
The Signs Of Concern
This past July saw Netflix report its first subscriber loss in eight years. Yes, there had been signs of slowing growth, but when you over 150 million subscribers worldwide, it’s hard not at least slow at some point, right? However, this loss had some interesting potential subtext: subscribers were already tiring of their content and readying to jump to other things.
“It’s notable that they lost subscribers before they lost a meaningful amount of content and before there was direct competition from their suppliers,” Wedbush’s Michael Pachter told THR — though it’s worth noting Pachter is bearish on the streaming giant. “This suggests they will face additional pressure when they lose content later this year and as their current [licensing] contracts with Warner Bros., Fox, Disney and NBCU expire.”
But They Had Foresight
It’s at this time that I’ll point to the obvious foresight Netflix had. Over the past few years, we’ve extensively covered their spending on original content. It’s spent billions and billions of dollars on original content over the years, and this year alone, they are expected to spend $10 to $15 billion (though it’s unclear if that accounts for licensed content as well). To many, this was seen as unsustainable.
But I saw it differently.
To me, this was an inescapable need for them as a company. They knew a day would come when Disney, WarnerMedia, and NBC Universal would pack up and bring all their toys to their own streaming service. It’s the way of the world for a studio to want to make as much money as possible from their I.P.s, so it made a lot of sense.
In a world where that was inevitable that they’d have to spend money to get this tone.
Netflix’s Shotgun Approach
So Netflix, seeing the writing on the wall, decided to do the smart thing: throw money at content. They used what I see as a shotgun approach, wherein they tackled all genres from all sides. They’ve jumped headfirst into animation, sci-fi, fantasy, comedy, romance, Hallmark (I count that as a genre), kids content, and everything else.
Their focus seemed to be in getting varied enough content to please EVERYONE. Their properties may never hit the same level of popularity as Star Wars, but if they get enough little properties to hit a certain level of popularity, they can hold their own, yes?
I saw this approach work in the anime industry before. Rather than go for sweeping, mainstream projects, they dig into the tiny niches and really capitalize on the existing fan base.
Only one problem.
Netflix Has Few Big I.P.s
As much as we love to applaud original ideas, we really don’t reward them with our cash monies very often. In their desire to get as much content as possible, they didn’t really focus on creating huge I.P.s that could compete with what studios like Disney, WarnerMedia, and NBC Universal have been able to accrue over their decades of history, and as much as we like to pretend we hate franchises and big I.P.s, they matter.
Off the top of my head, the only big mainstream I.P. I can think of that Netflix has is Stranger Things. Sure, there are plenty of other gems I love — GLOW, Umbrella Academy, Russian Doll, to name a few — but as far as mainstream hits? Yeah, not really.
Netflix Costs Too Much
And that brings us to the last point here. Netflix is too costly. Straight-up, there are TONS of little shows I subscribe to Netflix for, but they don’t have properties to compete with Star Wars, The Office, Friends, or Marvel. They just don’t. And when those other streaming services come out, it’ll become all the more apparent that the $12.99 or $15.99 a month I pay isn’t going to very many big ticket items — just a bunch of small-to-medium-sized ones.
This may be okay for someone like me, but for Joe Schmoe who’s just looking for that safe choice, it will be seen as an overpriced commodity.
Less Lucrative Shows
So, in a world where big studios taking their toys and going home is no longer a theoretical, Netflix is faced with a cold reality, as MoffetNathanson partner Michael Nathanson told THR.
“Competition is changing their business. They’re transitioning to a more uncertain model. They have to make more original content and it has to be as good as anyone’s.”
So, no longer can they just hope to bleed into every niche and satisfy them with content that just…exists. They need to make sure their content is as good as — or better — than the big guys. Sadly, that seems to be a harder and harder to do, as creators are realizing the shows aren’t as lucrative as they once were, which is pushing them to the more traditional big guys once again.
“We don’t make a lot of money when we do a deal at Netflix now,” one producer with a show on Netflix said. “They’re not throwing around cash the way they used to.”
So what does the future hold for the streaming giant? Who knows. We can’t predict the future. But the gold rush over at Netflix seems to be over, and with the other big studios finally entering the race, their lacking in the “big I.P.s” department really seems to be an increasing detriment.
What do you think of all this? Let us know your thoughts down below!
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