The time was October 2011. Real Steel and PA3 topped the box office. Fans cheered the explosive fourth-season finale of Breaking Bad. Beavis and Butt-Head (briefly) returned to the airwaves. And everyone hated Netflix.
Earlier that summer, Netflix – at the time still predominantly known as a DVD-by-mail service, but steadily gaining momentum as a platform for streaming content – had announced a change to their subscription system. The DVD and streaming options, they explained, would be split into two separate programs, each costing $7.99 per month. Audiences could opt for one or the other, but choosing both would require a monthly shell-out of over 15 bucks – a notable hike from the $9.99/month price for a standard DVD/streaming combo they had been charging at the time.
The reaction was swift and brutal. In the course of a few months, Netflix lost over 800,000 subscribers, and their stock dropped a precipitous 35%. Corporate executives across Hollywood panned the decision, and even Blockbuster got in on the act. (I’m hoping all you kids still know what Blockbuster is.) After a year of robust growth, the industry wunderkind appeared to be heading for disaster.
The postmortems, it turned out, were premature. Netflix junked the unpopular system and built its way back up the food chain. Over the next few years, it began rolling out exclusive TV programs and films of its own, and soon became one of the great titans of the entertainment industry – to no doubt the chagrin of many TV executives, CEO Reed Hastings at one point predicted that broadcast TV would be gone by 2030. The dual subscription plan seemed like nothing more than a blip, a brief misstep quickly papered over and corrected.
But I was recently reminded of that little misstep when Netflix released their reports for the first quarter of 2022 – and revealed that they had lost over 200,000 subscribers, causing their stock to drop for the first time since that fateful stretch in 2011. In the words of Sarah Lynn, “That’s too much, man!” Suddenly the industry titan doesn’t seem very titanic.
There are a number of factors at play in Netflix’s seemingly sudden decline. The increased price hikes are certainly notable (in early 2014, a standard Netflix subscription cost $8 per month; the price has nearly doubled since then). The streaming giant’s recent decision to suspend service in Russia likely ate into its profits (though it was far from the only streaming service to make that call). The pandemic gave outsized and inflated power to at-home entertainment, power that now wanes as people return to regular outdoor life. And of course, the ever-burgeoning supply of new streaming services, particularly from long-respected household names like Disney and HBO, has made for the field far more competitive in recent years.
But I’d like to build on that last point, because it speaks to a larger issue with the streaming juggernaut that once seemed to be the future of television: In the space of a decade, Netflix has gone from being one of the most important pop-cultural entertainment hubs anywhere… to a fairly middling (if overly content-heavy) basic cable network.
Whereas the streaming service once produced one buzzworthy and bingeable show after another – Orange is the New Black, Bojack Horseman, Master of None, One Day at a Time – their recent efforts have focused less on quality than on quantity, with dozens of shows competing for viewer eyeballs each month. While they popularized the “drop all episodes at once” model, their most talked-about shows (including Ozark and Stranger Things) have now begun splitting the seasons in two halves, the better to generate long-term interest. And though their library of acquired titles once teemed with mega-popular programs like Friends and The Office, that well has largely dried up, as rights revert to studios and original programming proves a better long-term investment. (The battle for acquired programming rages on, though; Netflix recently shelled out over half a billion dollars for exclusive streaming rights to Seinfeld.)
All these issues stem from the fact that Netflix did not begin its streaming life as a household name. When it began offering streaming content in 2007, it relied entirely on external studios willing to “lease” their programming out to a company that was at the time still known for delivering snail-mail DVDs. Once the streaming model grew in popularity, Netflix began making more inroads with large studios – for a time, they were the exclusive streaming home to new Disney theatrical features like Moana, Black Panther, and The Last Jedi. But then these studios began establishing streaming services themselves – and many of them have a decades-long head-start on Netflix. Disney Plus features nearly every film and TV show the Mouse House has produced, including the majority of Marvel and Star Wars films; recently, R-rated MCU shows like Daredevil, Jessica Jones, and Luke Cage began showing up there as well, leaving Netflix – their original platform – scrabbling for new superhero content. (Admit it, you’ve already forgotten Jupiter’s Legacy.)
And when all is said and done, that’s what Netflix is best at creating these days: Content. Netflix hasn’t spent a century cultivating itself as a household brand like Disney, nor has it shelled out hundreds of millions solely for the exclusive rights of a global property, a la Amazon with James Bond or Lord of the Rings. It’s not an all-purpose tech brand like Apple, and it’s not bundled with other streaming services like Hulu. It was, is, and will for the foreseeable future be its own brand – a brand devoted to supplying audiences with a steady supply of television shows and movies that will keep their eyes glued and their accounts subscribed. And that means that the Netflix model requires it to produce lots and lots of… stuff, week in and week out. It doesn’t matter whether the stuff is necessarily good (much of it, I can attest, is not), so long as it catches viewers’ eyes and keeps them subscribed for just… one… more… month.
Netflix does have a few advantages at its disposal. Despite the diminishing quality of its content, it features far and away the best user experience of any top-shelf streaming platform. HBO Max – while the best streaming service in terms of content- suffers from a glitchy interface (those who have ever tried to rewind a Hacks episode by 15 seconds will know what I mean), and Disney Plus still refuses to list their Marvel films in any sort of chronological order. Netflix, though, has a sleek and streamlined UI that allows for easy and accessible scrolling (and scrolling… and scrolling… there’s really a lot, isn’t there?), and it’s built up enough brand loyalty to withstand many of the acquired programming it’s lost over the years.
But at a certain point, that’s no longer enough. As someone who enjoys watching and writing about good onscreen entertainment, I don’t mind paying for a month or two of Netflix every so often. But market saturation has reached a point where the streaming service that started it all has now been outpaced and outclassed by many of the corporations that helped generate its rise in the first place, and now even less-buzzy services like Peacock and Apple TV Plus are taking their content in more interesting directions. As the streaming wars continue and audiences become more particular about their pocketbooks, the more generic and algorithm-driven platforms will continue to suffer.
When disclosing the industry’s potentially dismal numbers, Netflix CEO Reed Hastings reversed a long-held promise and announced that the streaming service would soon begin to feature advertising on its service. (Details are vague, but presumably commercials would be reserved for lower-tier plans, as with Hulu or HBO Max.) It’s perhaps the clearest indicator yet that Netflix is no longer the indomitable king of the streaming world. Expect more such indicators as the streaming wars continue to rage. And if you’re one of the execs who run the TV networks, maybe grab some popcorn.
Critically Touched 