After a record breaking 2020, all eyes are on Netflix to see if the company can come close to recreating unprecedented success found during a year when everyone was stuck at home.
This quarter was rougher by comparison, in part because Netflix is beginning to feel the effect of productions shutting down during COVID. If it seemed like there were less Netflix hits over the last few months than in previous years, that’s because technically there were. Netflix still reported just under four million new subscribers for its first quarter, however, coming in under analyst and the company’s expectations.
The company noted the miss in expectations was “due to the big Covid-19 pull forward in 2020 and a lighter content slate in the first half of this year, due to Covid-19 production delays.” While the company finished its first quarter with 208 million paid subscriptions, which is up 14% year over year, it fell short of the previous 210 million paid subscriptions prediction. As the company heads into the second half of the year, Netflix executives are expecting subscriber growth to increase as shows come back. Still, Netflix is advising investors to expect about one million net adds next quarter compared to 10 million the year before.
If we examine Netflix and the streaming industry as pre- and post-2020, the biggest change is an influx of competition. Up until late 2019 and the debut of Disney+, Netflix didn’t have any real competition in the subscription video on demand (SVOD, which simply means a streaming service you pay monthly or annually for) space. Hulu wasn’t really a threat, and Amazon Prime Video was grouped in with the overarching Amazon machine. Netflix’s biggest threat, as co-CEO Reed Hastings often said, was Fortnite, YouTube, and sleep.
Or, blatantly, Netflix was competing with other time sinks that people were finding quality entertainment in for free.
Now, Netflix has those same competitors, but a flurry of new ones: Disney+, HBO Max, Peacock, Discovery+, Paramount+, Tubi, and arguably the biggest time sink, TikTok. While Disney+ and HBO Max aren’t going to wipe out Netflix’s business by any means, executives will have to innovate new ways to keep people’s attention and continue growing subscribers. It’s something far easier said than done.
Competition impact is already visible. Two years ago, Netflix commanded about 65% of global platform demand share across all digital originals. Those are a lot of trade words that simply mean Netflix saw the most demand from audiences looking for new programming. In turn, that translated to consistent sign ups. Maybe people talked about The Handmaid’s Tale or Marvelous Ms. Maisel, but Netflix’s originals were constant conversation. Fast forward to 2021, however, and Netflix’s command has slipped to 50%. Why? Simple. It’s that tiny Baby Yoda, Kong taking on Godzilla, and a pleasant football coach named Ted Lasso trying his best in England.
There are more originals than ever before. Every company is trying to demand your attention, and there are only so many hours in the day. If a company can command people’s time and enjoyment, it makes the cost of a subscription more justifiable. Some competitors have obvious advantages. A new Marvel or Star Wars show is going to own people’s attention online every Friday (and into the weekend). Highly anticipated films like Mortal Kombat, Zack Snyder’s Justice League, Wonder Woman 1984, Godzilla vs Kong, and Dune will direct customers to HBO Max. Netflix’s obvious advantage is quantity; spending $18 billion a year on content will always help, but it’s not about how much you spend, it’s where you spend it.
Netflix’s The Witcher: Season 2 Photos
Netflix doesn’t have built in franchises, but it’s getting there. Bridgerton saw 82 million households tune into the show within the first four weeks. (Or, at least two minutes of one episode, according to Netflix’s measurement for a stream.) The show has remained at the top of Nielsen’s most watched streaming programming in the United States for weeks on end. Ginny and Georgia, Lupin, Yes Date, and We Can Be Heroes all saw tens of millions of streams, according to Netflix.
On the horizon, Netflix has a number of shows that could become the next big thing. Shadow and Bone, Jupiter’s Legacy, Sweet Tooth, and Cowboy Bebop are some of the new series, while popular favorites like Ozark, The Witcher, and Dead to Me are all returning for new seasons, too. Add in Umbrella Academy, Stranger Things, Money Heist, and unscripted series like The Circle, and Netflix is doing just fine.
Look, Netflix isn’t at any risk of becoming a forgotten platform that will see droves of people cancel their subscriptions. But there’s still a question about how to spend $18 billion. If someone gave you the choice between buying Iron Man or buying something like Iron Man, you’d probably buy Iron Man. There are plenty of things like Iron Man, but only one has Tony Stark. The “like Iron Man” space becomes cluttered with junk — fast.
It’s extremely difficult to create a franchise. Netflix has done it a few times, but there’s a reason the company is partnering with Ubisoft for an Assassin’s Creed series, and The Witcher was an obvious choice. Those are Iron Man. Other companies create shows that feel like The Witcher, but aren’t. For everything else, Bridgerton and Stranger Things are the ultimate goals. They’re shows that feel new in an overtly crowded space and, to tie everything together, they demand attention from people who are bouncing around between a dozen different entertainment platforms.
Finding those diamonds in the rough is, again, easier said than done. If Netflix can command attention, they can command monthly subscriptions. And if they can command monthly subscriptions at a high rate (meaning people aren’t canceling en masse), they can increase prices slightly from time to time and boost their revenue. This can only happen if demand stays high and people are willing to pay.
That was simpler to accomplish when there wasn’t a horde of massive conglomerates releasing quality entertainment, and looking to take some of Netflix’s customers time. Trying to determine how to continue growing Netflix in the United States, at a time when the platform has almost hit max saturation (anyone who wants Netflix would have Netflix by now), is about to become more of an issue, too. The solution is in line with the other half of streaming’s equation: how do you keep customers when it’s easy to cancel every month and there are a plethora of options?
Regardless, Netflix is still Netflix — it’s still the streaming service that I open first and foremost when I switch on the television. It’s just that HBO Max and Disney+ are eating way more of my time; time that would have belonged to Netflix just two years ago.
Julia Alexander is IGN’s top streaming editor. Have a story tip? DM her on Twitter @loudmouthjulia or request her Signal number by emailing [email protected]