Is Netflix Actually In Trouble?

Nothing lasts forever — not even Netflix’s aggressive expansion. However, recent reports of the streaming pioneer’s sudden demise are greatly exaggerated. The company won’t go the way of Blockbuster, but the days of Netflix being able to cook up whatever content it wants are over.

Last week, Netflix announced that its amount of paid subscribers declined for the first time in more than 10 years, and forecasted a drop of 2 million more subscribers in the second quarter. The streamer still has about 222 million subscribers worldwide, making up the lion’s share of the market. Even still, following the news about the subscriber dip, Chairman and Co-Chief Executive Reed Hastings announced the company would start cracking down on password-sharing and start exploring how to implement a lower-priced, ad-supported tier of its service. The animation department will also take a huge cut.

“Those who have followed Netflix know that I’ve been against the complexity of advertising and a big fan of the simplicity of subscription,” Hastings said in the Wall Street Journal. “But as much as I’m a fan of that, I’m a bigger fan of consumer choice.”

A lot of those consumers chose to cancel their subscriptions. But why now?

Netflix has repeatedly defined itself by what it’s not: No live TV, no live sports, no ads, no weekly release dates. And, as David Sims points out in The Atlantic, no other revenue stream — Disney has theme parks, Apple and Amazon are tech giants, HBO has theatrical releases, Netflix just has Netflix. Now, after 15 years of streaming content, the company that pioneered what it means to watch accessible content at home is fighting to stay relevant. In doing so, its new business model looks a lot like…regular TV. The old ad model works for a reason.

Some reports, like this one in The Hollywood Reporter, point to growing discontent behind the scenes before last week’s earnings forecast. But the bigger question is: Is this the canary in the coal mine for original content on streaming services?

Netflix redefined the binge-watch and was often the go-to for people to steam big series like The Office or Friends. It spent billions on original content, greenlighting things left and right for years, in an attempt to expand its volume. Many of those shows and movies ahd no discernible impact beyond their debut weekends.

The company had no real competition for a long time. Once the companies that owned shows like The Office or Friends slowly realized they could make more money by running their own streaming services instead, and other boutique streaming services like Criterion Channel or Shudder popped up to fill their own niches, Netflix was left with an identity crisis. It wasn’t enough to just be the brand that did it first, or had the most content. What else do you bring to the table? Netflix hasn’t had to answer that before now.

There’s just too much content, and in Netflix’s case, not enough of it is good content. Years ago I remember using Netflix like an extensive film library. It was where I saw The Godfather for the first time, and where I found stuff like the City of Lost Children. Now? You’re more likely to find a Netflix-branded clip show talking about favorite moments from The Godfather. And good luck finding any movie made before 1985. Most of those are on HBO Max or the Criterion Channel.

What Netflix is focusing on now, in addition to campaigning for Oscar glory and buying up very expensive Ryan Reynolds movies, is interactive video games. Co-CEO Reed Hastings has said that the one of the company’s biggest competitors isn’t another streaming service; it’s Fortnite.

Black Mirror’s choose-your-own-adventure episode, Bandersnatch, was a test run for this. There’s now a Trivia Crack show where each episode is a level of the popular mobile game, with questions increasing in difficulty each episode, and Cat Burglar, a Tom and Jerry-style caper where the user controls what happens by answering rapid-fire trivia questions. They’re fun, but whether they will become popular is yet to be seen.

If Netflix figures out a way to bring a great gaming experience to a streaming service, that would be revolutionary and a new step forward for the company. It could also try to differentiate itself by offering more theatrical releases for its films — not just the ones it thinks will win Oscars. The National Association of Theater Owners said recently it would love to screen more Netflix films. (And now that Apple TV+ beat Netflix to the punch for the first streaming movie to win Best Picture, the pressure’s off.) The company could also experiment more with running time and release models, like with the Fear Street series. There are many ways for Netflix to right the ship, and consumers should expect other streaming services to go through the same kinds of growing pains soon.

But 222 million subscribers is still nothing to scoff at. Netflix isn’t going anywhere. It’s just changing for the first time since the streaming era started. Whether subscribers will follow is another story.