It’s no secret that Netflix is the number one platform for viewership and influence. It is also beginning to be known that the platform is beginning to have certain problems so that the accounts balance. According to ‘The Information’, Netflix is launching some notices to its employees so that they moderate their level of expenses. It has done so twice in the past week, including an executive event in California, suggesting Netflix is going into savings mode.
What has Netflix said to its employees. Netflix is dealing with slower-than-expected subscriber growth. The official warning from bosses to middle managers has been to be sensible about “spending and hiring.” The latest data available on its audiences is that of almost 222 million subscribers at the end of 2021.
A growth whose greatest explosion occurred with the pandemic: at the end of 2019 they had 167 million subscribers, which jumped to 203 million at the end of 2020. That is, in the following year they have grown by half: the recovery of normality after COVID and the appearance of competitors such as Disney + and HBO Max are the cause of this growth of 8.9% compared to 22% the previous year.
Things don’t get any better next year. And the forecasts continue to reflect this slowdown: for the first quarter of 2022, whose results will arrive at the end of April, Netflix expects to increase its number of subscribers by 2.5 million, a spectacular drop compared to the 8.29 million new subscribers that came with the end of 2021, but also a drop compared to the 4 million in the same period at the beginning of the year in 2021. And all this is reflected in the shares, of course: they fell by 1.48% when these results of the last year.
And the numbers? In 2021, Netflix announced a net profit of 5,116.2 million dollars, an improvement of no less than 85.2% compared to the result of the previous year. Good, but not so good: in the last quarter, Netflix’s profit was a 58% drop compared to profits between July and September. And its increase in subscribers was slightly below expectations.
That is to say, Netflix is not doing badly, but it is forced to move with lead feet in the panorama of the transmission post-Disney+: costs increased by 13.5% during 2021 due to the firm commitment to a catalog of films and series that, without Warner and Disney on their side, they have no choice but to produce themselves. It is precisely the competition that forces you to watch the figures: Disney + already has 130 million subscribers, having launched in November 2019.
Some possible solutions: charging for shared accounts. As we told you a few days ago, Netflix is beginning to experiment with cutting off shared accounts in some countries, and although the terms of service specify that these are prohibited, it has not made any firm decision in this regard. It remains to be seen if a step is taken in a more restrictive direction. Among other possibilities that the platform possibly handles is a cheaper specific plan for mobiles and only in certain countries.
The ads option. Analyst Ben Thompson told ‘Stratechery’ that Netflix has an obligation, if it wants to grow, to find alternative ways of earning money beyond subscriptions. Among other things, because in countries like the United States and Canada, where it has more viewers than traditional linear television, it doesn’t have much room to grow in customers. One option is to build an advertising business based on advertising, but not for everyone. For now, the company’s CFO, Spencer Neumann, leaves the door open to that possibility.
According to Thompson, this option would have numerous benefits: on the one hand, a cheaper subscription option with advertising would increase the number of clients they now have, and that due to the high price of the platform (in the table you can see the evolution they have prices suffered in recent years), they were hesitant to subscribe. On the other hand, and in the opposite direction, Netflix could raise the price of a premium subscription without advertising. A strategy that Disney + has already revealed that is also part of its plans.
‘Stratechery’ recounts that the filler material, which Netflix produces to a much greater extent than its competitors (from themed fireplaces to game shows and realities very cheap to produce) is paid material for advertising. In other words, Netflix has a platform that is especially conducive to the insertion of advertising. And furthermore, it is in a dead end that cannot be solved with an increasingly timid increase in subscribers. And someone has to take the first step.