How tight is the competition for Netflix in 2022, after

How tight is the competition for Netflix in 2022, after

As in Netflix’s latest blockbuster “Don’t Look Up,” the sky could fall over the world’s largest streaming video platform. Pessimistic forecasts could nullify much of what he gained during the pandemic.

The world’s largest streaming service has had a roller coaster ride in the two years of the pandemic – a spectacular rise in early 2020, when almost the entire planet stayed home for more than a month, followed by an increase slower and slower in 2021.

Netflix shares fell 41% from a record high just two months ago. The number of new subscribers is growing at an extremely slow pace, and the competition is getting stronger. The reaction of the company based in Los Gatos (California)? It increased the price of subscriptions on the North American market, where it was the highest anyway, compared to other international markets.

After reaching the Olympus of online streaming, Netflix is ​​now making efforts to reach the top again, which will not be at all handy, given that rivals are also gaining ground.

“It simply came to our notice then. Prices continue to rise to maintain the volume of subscribers they have and are constantly adding new content, but in terms of content volatility is higher, with ups and downs, “comments for CNN Business Michael Nathanson, media analyst.

“Don’t Look Up”

Up or rather in the future. It hasn’t been long since Netflix pampered the stock market, and yet those days seem far away – in November last year, its share price peaked at $ 700, and by the time the article was published on January 21, it had dropped to $ 400. dollars per share. Last year, Netflix closed with a volume of almost 222 million subscribers, which is significantly more than any competitor in the streaming segment, including Disney, the most formidable of rivals (the latter had about 118 million subscribers in October last year). The major and worrying difference for Netflix is ​​that while Disney’s subscriber growth rate was 60% between October 2020 and October 2021, Netflix’s was only 9%.

So far, Disney has not reported its financial results for the last three months of 2021, we only know that Netflix has grown extremely slowly in the last quarter, by only 8 percent (only, this time, the growth of Disney in the last quarter kind of scared the analysts on Wall Street).

According to Refinitiv IBES, quoted by Reuters, the world’s largest streaming service is expected to attract 2.5 million new subscribers by March (less than half of the 5.9 million expected by analysts). He blamed the slowdown on the launch of two long-awaited projects – the second season of “Bridgerton” and Ryan Reynolds’ “The Adam Project”.

It should be noted that last fall’s winter forecasts were more realistic – between October and November, Netflix increased its subscriber base by 8.3 million, with the release of several expected films (in terms of the distribution of big days) including “Red Notice” and “Don’t Look Up”, but also a new season of the series “The Witcher” (industry analysts had predicted 8.4 million new subscribers).

Vertically

Especially in the markets where it has been operating for the longest time, such as the American one, Netflix is ​​struggling to convince more and more people to subscribe to its streaming service, notes Nathanson. The company will also have to do its best to grow in emerging markets such as India and Asia-Pacific, the same analyst continues.

The problem with the subscription-based business model is that after a while, no one stays unsubscribed. Bad news for Wall Street investors who are very careful (and worried) about the ability of companies to grow.

Zak Shaikh, vice president of software for Magi, believes that Netflix’s sting is more of a strictly capital market issue, a Wall Street issue, than something that reflects a fundamental dysfunction of the model. business. “They continue to attract new subscribers and still have good audience engagement and retention rates,” Shaikh said, adding that “in the long run, Netflix will have to face reality – you can’t attract new subscribers indefinitely.”

One way the company tried to make up for the slower growth was to invest in other verticals – gaming is one of them. Another was to raise prices, but here it may be hit by the boomerang effect, in a context where competition is fiercer.

risk

Up to a point, the policy of price increases will most likely counterbalance the slower pace of growth in the number of subscribers, but in the medium and long term it is possible to deepen the stagnation of the business. For some customers, the price increase – even an insignificant one – may have a greater impact in fact, pushing them to more closely evaluate the offer of rivals blowing in the back of Netflix – Disney +, Peacock and HBO Max. In fact, even Netflix admitted earlier this year that the intensification of competition “affects the marginal growth of the business anyway.”

In a statement following the annual revenue announcement, the company’s co-executive, Reed Hastings, said the conservative financial outlook had several reasons – including the prolongation of the pandemic and the post-COVID economic crisis. However, it counterbalanced, expressing confidence in the future of streaming services, but especially in the huge market share accumulated by Netflix and the constant delivery of content according to public expectations. “We remain calm for the time being,” he said. But will it still be quiet by the end of 2022? What about investors? CNN Business asks.

“The competition will deepen even more in 2022. The sport has entered the area of ​​streaming services. Amazon will release “Lord of the Rings”, followed by the merger of Discovery with HBO Max, so more HBO content, “Nathanson said. “I think 2022 will be a year of concern for Netflix in terms of its growth model, but also in terms of competition,” he was quoted as saying by CNN Business.

Netflix, looking for customers

If in 2020, Netflix attracted 36 million new subscribers, in 2021, the number dropped to just 18.2 million.

THE SUCCESS. Founded in 1997 by Reed Hastings and Marc Randolph, the company began selling and renting DVDs via e-mail, and in ten years’ time it has entered the streaming market for the next innovative step in developing original content. broadcast globally and outside traditional media channels. GAMING. The company is looking for new ways to attract customers, including by launching mobile video games. In 2021, it launched ten such games that were well received by the audience, which is why this year, the plan is to expand its gaming portfolio. RIVALS. Disney and HBO Max are investing billions in content creation to increase their market share in the streaming segment. Everyone, including Netflix, is counting on the fact that the migration of the audience from classic television to streaming will continue and open up new opportunities. GROWTH. Much of Netflix’s projected growth will be provided by markets in Asia, Europe, Latin America, where the average revenue per subscription is $ 9.8, compared to $ 14.7 in the US and Canada.

This article appeared in issue 134 of . magazine

PHOTO: Getty