Members of Netflix’s executive leadership have said the company will seek to rein in spending and enforce more financial discipline across its operations following disappointing financial results in the first quarter of the year — reports The Wall Street Journal.
In its Q1 2022 earnings call on Tuesday, Netflix reported a net loss of 200,000 paid subscribers — the streamer’s first subscriber loss in 10 years. The news sent shares plummeting 25% in what was the stock’s second-worst one-day decline ever, wiping out $54 billion USD in market value.
“Well, it’s a bitch,” Netflix Chairman and Co-Chief Executive Reed Hastings reportedly said about the results while addressing employees in a town hall on Wednesday afternoon.
Netflix’s first-quarter results are a reality check for the company — the platform is bleeding subscribers to other services, and execs even blamed password-sharing for putting a damper on earnings. It looks like Netflix’s days of carefree spending on programming are coming to an end.
Over the course of the last year, the streaming giant put out 500 original titles. Netflix will now look to add fewer titles while placing greater importance on quality, according to sources abreast of the company’s strategy.
Netflix is reportedly reworking production deals to limit its risk, which producers and showrunners used to extravagant spending from the company are not taking too kindly to. Sources say the streamer is prioritizing programs with the biggest return, not the greatest reach. A key internal metric at Netflix is the ratio of a program’s viewership to its budget.
“We should right-size budgets depending on what the creative dictates, and what the size of the audience is,” said Bela Bajaria, the head of global TV for Netflix, in a recent interview.
Netflix had to reach deep into its pockets back when it started making original content and had to bid on high-profile shows like House of Cards, but that was before the streamer had established itself in original programming. “That was the cost of entry, the cost of doing business,” said Bajaria.
According to company executives, Netflix still expects to grow spending on content to more than $20 billion over the course of this year, but it will do so while assessing its budgeting more closely. That doesn’t mean the service will cheap out on production, Said Bajaria. “We’re always going to make great shows and have the amount of money needed for the creator’s vision,” she said.
The streamer may also look to supplement its income from subscribers and attract more cost-conscious viewers in a single move by adding lower-priced, ad-supported subscriptions, Hastings said during Tuesday’s earnings call. Netflix has also hinted at plans to “monetize” password-sharing among its customers.
In addition to cutting back on the money it pours into original programming, Netflix will also look to lower its costs when licensing shows it doesn’t own from outside studios and production companies. An executive from one studio with multiple shows at the streamer said that in some cases Netflix wants to reduce spending on licensing for new shows by as much as 25%.
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Password sharing is not why they are in decline. They always been aggressive at trying to shut down sharing and many others seem open to sharing.
Content is king and they seem to have lost their way in that area.
$5 a month to $22 a month doesn’t help either. I’ve held my account since day 1 here but at $22 they are starting to lose my interest.
Agreed. But, year after year of increases, they were still enough to hold people’s interest. That doesn’t seem to be as strong a cases anymore. Maybe it’s not just their content has gone downhill and makes them less attractive with the price hikes. Maybe their competitors are better value and/or better content.
It’s probably a bit of all those things. They lost subscribers in Russia, their prices have crossed a significant threshold, the pandemic “ended” in time for spring and people are leaving their homes again, the price of food and gas have gone up considerably, and the new season of Stranger Things didn’t come around fast enough to remind people why they were still paying for Netflix to begin with.
Netflix handed me off to Disney Plus when the prices & restrictions kept going up, It became cheaper to try the competition. Didn’t have to pay for higher quality, just already had it at base price.
The library was a breath of fresh air too, however I don’t think anyone should stick to a single service permanently. Move that money around every couple months, try them all at practically no extra charge when content gets stale.
One factor that wasn’t mentioned explaining the sudden decline in viewership is …. COVID-19! Yep. That decline coincides with a massive return to work for a substantial number of current users. The small lag between the progressive removal of confinement measures and the current and coming (about 2 million cancellations are expected for the next quarter !!) and its acceleration follows a pattern where people come to realize they are paying for a service they aren’t using anymore. That realization typically follows an exponential progression in social media.
I am actually surprised Netflix isn’t factoring this in – or prefers not to mention it for obvious reasons.