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Netflix, the rebels, are under attack as the empire strikes back

4 May 2022 7:15 PM
Digital technology

Lessons from a galaxy far far away about what the streaming wars means for us.

Netflix recently announced it had lost subscribers for the 1st time and expected to lose many more.

The question is why and what it means for the TV and movie disruptor.

Returning to a Star Wars analogy Netflix was founded as an alternative to the video empires of Blockbuster that would fine you for returning a video late, they opted to let you keep the video if you wanted but you could only get another when you returned it. They also pioneered using the mail to send and return the DVDs that were the standard in the 90’s

Their plan was for Blockbuster to acquire them and to grow with the dominant player. Blockbuster were not interested in being challenged and rejected the offer.

The video empire of Blockbuster had turned the video fans on the fringe of their business into rebels and they revolted.

Not only did they surpass Blockbuster they had taken aim at another empire they could challenge - movies and TV.

That was 2008 when they started streaming movies. By 2011 they had seen their share price rise to a new high of $35.

The movie other empires took note of the rebel attacks and began limiting Netflix access to the content and so in 2012 Netflix began creating its own. If you have heard of House of Cards, Orange is the New Black it is thanks to Netflix, they even looked at shows that the TV networks had dropped and brought them back. By 2014 it was not just a trendy way to watch movies, it had become a meme for having sex as an invite to Netflix and Chill.

This may be the first inkling of another behaviour that did not square with their preferred user behaviour, sharing. Visiting someone to watch a show is still encouraged, but with every device able to stream Netflix now, the preference is just to share the login and watch where you are.

Netflix revealed that as much as half of the 220 million subscribers share their passwords and if you can watch via someone else’s account there is no need to get one for yourself.

But this was not a problem yet as Netflix was still signing new users and expanding across the globe and creating more content than most. It arrived in South Africa in 2016 with many Afrikaans speakers understanding immediately what it offered “net flieks”, it now offers four tiers to try to suit your pocket from R50 per month to R200 depending on the quality of the stream and the number of screens that can be used at the same time. It had also reached the $100 share price by then.

Background: here is the Business Unusual feature from 2016

The innovations in streaming and content recommendation and offering ad free binge watching played a big part to keep Netflix growing and by the middle of 2019 its share price was over $350 and looking like the rebel had won, but there was something else that helped them climb especially in the US where bundled services like cable TV were included with phone and internet access and while there was lots of content it was typically not on demand and not always very good.

So as consumers turned away from buying the bundles, they began to buy Netflix and then also the new entrants like Apple and Amazon who also began offering streaming video.

Rather than the various factions entering the climatic finish we hoped for from Game of Thrones the pandemic made streamers out of all of us, and subscribers and profits continued to soar.

In November last year (2021) Netflix reached $700 a share, just 20 years earlier its share price was just $1. It was now worth more than most of the century old movie creators and TV studios.

Roll the credits, play the big victory montage, Netflix has won. It was in profit, still growing and producing more content than at any point before.

Not only were many shows being commissioned, but they were also being created all round the world. Creators were happy, viewers looked happy and Netflix staff and management looked happy.

But the Death Star was nearly complete, and it was ready to open fire. Disney is bigger still and not only does it own lots of content, it is able to distribute its content on multiple platforms and runs parks and sells toys and games.

It was not in a hurry to join the streaming rush as it focused on first buying the Star Wars franchise then the Fox Network of shows including the Simpsons and the entire Marvel Universe.

They are still not as big as Netflix in subscribers, but they are still spreading its content across the streaming world. It will launch in South Africa on 18 May with a special offer to get a year of access for less than a R1000, a month of DStv premium is about R840.

For anyone with kids this will be a very compelling option and should you not be a fan of cinema’s Disney allows you to pay to watch a movie on circuit at home. (Not sure if that will be available in SA)

In late April, Netflix CEO, Reed Hastings reported on the bomb that had gone off at Netflix. The market reacted quickly and sharply; the market cap lost $50 billion in a day. The share price fell to 2017 levels at under $200 and there is expectation for more trouble. More subscriber loss and less revenue and no profits.

What happened?

There are many factors, but a few played a bigger role. Netflix is primarily a subscription service - no ads, it looks like they will introduce those to lower tier subscriptions to increase revenues to what is a massive audience.

They spend a lot on making shows, it is not a bad thing, but as many new shows get created as get cancelled and so fans don’t or can’t stick around from one season to the next when the is no next season.

Binge watching is now a real thing, but it means that subscribers join for a month, watch the new hit show and are gone by the end of the month.

Netflix has few series that could keep you watching for weeks, if you watched six episodes of Seinfeld a day you could finish it in a month, if you would like to try do the same with the Simpsons you would need to watch 26 episodes a day. - try for yourself at

A great service to track where to find your favourite show is JustWatch, load the platforms you have access to and search for the show you want and it will tell you where it is.

There are also views that Netflix has not found the right mix of shows to retain the many and diverse audience it has although the main reason is that is finally seeing the impact of all the competition following a pandemic while users need to find the best deal in tough economic times.

Netflix broke the mould and created a new way to consume content, but it is still an entertainment business that got a crazy high market valuation.

In the end it is not a planet destroyed by the Death Star, it is a big company that has fallen back to Earth.

Now we need to see what happens in this space, the final frontier, who will live long and prosper?

4 May 2022 7:15 PM
Digital technology

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