By James Browning
Johannesburg – A day after announcing a decrease in subscribers, the incorporation of advertisements, and charges for account sharing, Netflix stock was down 35 percent.
Reports of decreasing subscriber numbers and a subsequent stock price drop come after months of experimentation by the streaming service leader.
In a world where the pandemic pressures that pushed content streaming into its dominant position have slowed, Netflix has been experimenting with ways to stay competitive and reduce loss.
As the beginning of an effort to crack down on account sharing, with Netflix claiming that their service is shared with more than 100 million non-paying households, Netflix trialled charging users in Peru and Chile an additional fee for accounts being used across multiple locations as well as introducing two-step verification when logging in to a device outside the home.
In a similar vein to competitor Hulu, Netflix has also announced that it will be launching new lower cost account options which will include advertisements.
Wider consumer choice can only be good for business in a world where sites like YouTube have made people quite tolerant of ads and Netflix remains the most expensive service among its many competitors by almost double.
Netflix used to be a streaming hub for all publishers, but now the streaming world has fragmented, with major players all looking to create their own platforms.
While Netflix still tops subscriber rankings of streaming platforms, the peloton of Amazon Prime, Disney+ and Apple TV has been steadily closing the gap.
It is also very important to remember that these are paid subscriber numbers.
If one looks at the streaming ecosystem in terms of users, user-generated content platforms like YouTube and TikTok dwarf the viewership of these film and TV show distributors.
Netflix’s price increases over the years have had to compete not only with other paid services which drained their content pool and local content producers grabbing up non-US market share, but also free services that double as social media platforms.
With the biggest publishers moving their content to private platforms, Netflix has to rely more on its original shows and movies.
Alongside mixed public reception of its Netflix Originals catalogue, it has gained a reputation for having a quick trigger in cancelling original series after one or two seasons.
While these moves are undoubtedly driven by insightful internal viewership data, scorned fans of niche content tend to have a disproportionate impact on a company’s image on the internet.
This fragmenting of the video streaming ecosystem has also precipitated a rise in film and TV content piracy.
The platform Steam has been the largest digital game distribution platform since 2013, in an industry that has often been riddled with piracy concerns.
Steam’s founder Gabe Newell has famously stated that piracy is not a pricing issue, but rather a service issue, and that the easiest way to stop piracy is to give people “a service that’s better than what they’re receiving from pirates”.
Netflix’s rise in popularity (alongside the other streaming platforms it paved the way for) saw a decrease in piracy as people finally had easy, centralised access to the content they loved from many different distributors.
Now that a person usually needs multiple streaming subscriptions to meet their wants, this piracy trend has reversed as illegal streaming sites and peer-to-peer file sharing clients offer a simpler, cheaper (usually free) and more centralised service.
These factors mean we may see the wheel turn again in the cycle of bundling and unbundling of services, with the rise of some kind of overarching subscription service that gives access to multiple streaming platforms or some kind of compromise from the major streaming players.
Considering wider tech business trends of monopolistic control over rugged competition, it may be likely that we see larger platforms capture the market through mergers.
HBO has already made public plans to merge with Discovery’s streaming services, though its currently unclear whether this will be just a business organisation decision or whether this will also result in some kind of mixing of their products.
IOL Wealth