Friday, April 22, 2022

Netflix, Facing Reality Check, Vows to Curb Its Profligate Ways

It's funny, because I just haven't been watching *anything* on Netflix of late. I like news, movies, sports. It's got to be a very good streaming series for me to invest the time to binge watch or view over multiple seasons. 

I actually watched the first season of "Euphoria," but that was on HBO. I'm too busy with school right now in any case. Summertime is when I have the time to watch a lot of television (though I did see "Passion of the Christ" on Netflix before Holy Week just past). 

I'm not canceling my subscription just yet, but honestly, I use Amazon Prime more frequently these days. 

Oh well.

At the Wall Street Journal, "Streaming service spent lavishly on productions to win subscribers, but now growth has slowed":

For Netflix Inc., the era of carefree spending is over.

The streaming giant ran up a huge bill over the past several years as it expanded across the globe and produced a mountain of programming, prioritizing growth over cost efficiency. Now the company is imposing more financial discipline, according to senior executives.

The shift comes as competition from an array of streaming rivals begins to take a toll, a new reality that was evident in first-quarter results announced Tuesday. The company lost subscribers for the first time in over a decade, and revenue grew at its slowest pace in years. Shares plunged 35%, the stock’s second-worst one-day decline ever, erasing $54 billion in market value.

“Well, it’s a bitch,” Netflix Chairman and Co-Chief Executive Reed Hastings said of the results while addressing employees in a town hall on Wednesday afternoon, according to people familiar with his remarks.

After churning out over 500 original programs last year, Netflix is looking to add fewer new titles, with a greater emphasis on quality, people familiar with the company’s strategy said. It is revamping production deals to limit its risk, and prioritizing programs with the biggest return, not the greatest reach, the people said. A key internal metric: the ratio of a program’s viewership to its budget.

“We should right-size budgets depending on what the creative dictates, and what the size of the audience is,” Bela Bajaria, the head of global TV for Netflix, said in a recent interview.

She said when Netflix first started making original programs it had no track record and had to make outsize bids to land “House of Cards” and other high-profile shows. “That was the cost of entry, the cost of doing business,” Ms. Bajaria said.

Netflix executives said the company expects to continue to grow spending on content to more than $20 billion this year while scrutinizing it more closely. Ms. Bajaria said that doesn’t mean the service will go cheap on production. “We’re always going to make great shows and have the amount of money needed for the creator’s vision,” she said.

As it looks to rein in costs, Netflix is also exploring new ways to boost revenue. In January, the company said it was raising prices in the U.S. and Canada. On Tuesday’s earnings call, Mr. Hastings said Netflix is exploring adding a lower-priced, ad-supported version of the service to court cost-conscious viewers. And, after blaming password-sharing for limiting its growth, Netflix says it is looking to “monetize” the practice.

The newfound focus on content costs is causing tensions with Hollywood’s producers and show runners, who have benefited from the streamer’s largess. Netflix’s tendency to give shows a quick hook when it believes they aren’t delivering a return is another sore spot with producers and creators. Some producers say Netflix needs to be more aware of its competitive environment, and factor in the programming rivals are launching when deciding when to release its own shows.

“If there is anything I would say is a fault of Netflix, it is that they are so insular. They may not see what’s going on outside their walls or they know and the hubris is so great they don’t care,” said Jeff Fierson, whose credits for Netflix include the movie “Sweet Girl” and the short-lived series “Daybreak.”

Mr. Fierson noted that “Daybreak”—a show about teens in a post-apocalyptic Los Angeles—made its debut close to the premiere of Disney+’s “The Mandalorian” and the debut of the Apple TV+ streaming service.

Warning sign Netflix still leads the pack in streaming video with more than 220 million subscribers. But its recent turbulence has rattled Wall Street, causing investors to question how big the pot of gold is in the streaming wars. Shares in Paramount Global, which operates the Paramount+ streaming service, fell 7% on Wednesday, while shares in Walt Disney Co., owner of Disney+, fell 5% and shares in Warner Bros. Discovery, owner of HBO Max, fell 5%.

Disney+, Netflix’s closest rival with 130 million subscribers globally, is starting to feel some pressure as well. The company launched a low-cost, ad-supported tier to boost subscribers. It is broadening beyond the “Star Wars” and “Marvel” programming that has anchored Disney+, hoping to reach new audiences and be better positioned to achieve its target of between 230 million and 260 million subscribers by the fall of 2024. The ABC show “Dancing with the Stars,” which appeals primarily to an older audience, will move exclusively to Disney+ starting this fall.

All streaming players are learning that adding new subscribers is getting much harder, especially in the mature U.S. market. Every service is under pressure to create a steady flow of new shows and movies to draw in new subscribers and retain existing ones. The hope is that every once in a while they’ll score a big hit like Netflix did with “Squid Game,” “Tiger King” and “Queen’s Gambit.”

Veteran media analyst Michael Nathanson, who has raised concerns about the prospects for major players in streaming, said consolidation that reduces the number of competitors might relieve some pressure, but “for the time being, this is a pretty capital-intensive business.”

Some producers and writers say they are frustrated by inconsistent guidance from streaming services, which are always looking for a new formula to attract more subscribers. “As creative people we are getting whipsawed. There is not a mission statement that sticks around for more than a couple of months,” said producer Mike Royce, whose credits include the Netflix reboot of “One Day at a Time.”

When Netflix first introduced original programming to its platform a decade ago, its pitch to creators was that there would be little interference from the “suits” and no worries about ratings. In recent years the company has spent hundreds of millions of dollars signing superstar producers including Shonda Rhimes and Ryan Murphy, setting off a talent arms race among Hollywood studios.

Now, the service has a never-ending conveyor belt of new content. Shows have a window of several weeks to find their audience or they are canceled, meaning they usually aren’t promoted on the home page and become harder for viewers to find. Netflix executives say the company’s cancellation rate is on par with that of rival streamers, and of broadcast and cable networks...