With the number of new Netflix subscribers declining for the first time in a decade, what’s next for the fast-changing streaming platform sector?
by Fred Heritage
The landscape for film and TV streaming services is changing rapidly. For the first time in ten years, Netflix, the world’s largest streaming platform, has lost subscribers, while relative newcomer Disney+ continues its impressive growth, according to a Forbes article by Marisa Dellatto.
Dellatto writes that Netflix is one of the only streaming services to have lost paid subscribers this year, with subscriber numbers falling by almost one million since March 2022, and nearly 1.2 million since December 2021. However, Netflix is still the largest streaming platform, with some 220.7 million global subscribers as of June this year, she writes.
Dellatto reports that the group of streaming services owned by Disney, which includes Disney+, Hulu and ESPN+, rose from 196.4 million subscribers in January 2022 to 205.6 million in April. And HBO, HBO Max and Discovery+, all of which are now owned by Warner Bros following the merger of Discovery and WarnerMedia in April this year, had a combined 92.1 million subscribers in June, up by just 1.7 million since March.
A tumultuous year
Explaining why 2022 has been such a “tumultuous year” for streaming services so far, Dellatto says it’s because the largest media companies are increasingly prioritising streaming over traditional television. “More changes are to come,” she writes. “After Netflix suffered its first subscriber losses in over a decade … the company said it would launch a cheaper ad-supported tier and cut down on password sharing, which it blamed for some of the deficit.”
Ad-supported streaming services could become the norm, according to an article for Observer by Rachyl Jones. Disney+ also intends to start showing advertising later in 2022, she writes. Meanwhile, the newly formed entertainment giant Warner Bros Discovery (WBD) has hinted at its own ad tier, says Jones, after the company recently disclosed the 4% revenue increase it made in Q2 2022 from the individual ad tiers of HBO Max and Discovery Plus.
“Businesses are always aware of what their competitors are doing, even modelling their own products close to that of their competition,” says Jones. “But Netflix hasn’t wavered in its stance on ads until now, suggesting that they are only changing because they have to. Netflix stock has more than halved in value over the last year, so this additional revenue – paying advertisers and a service targeted at people who might be sharing passwords or who cancelled their service after the Covid lockdown – is about meeting their bottom line.”
Looking for value
In an article for Videoweek, journalist Tim Cross argues that the most important moment of 2022 so far for the streaming services sector may have come in Warner Bros Discovery’s Q2 conference call for industry analysts, when CEO David Zaslav outlined the company’s intention to pull back from “a streaming-first mindset”.
Cross writes: “Zaslav was at pains to point out the value of WBD’s other businesses, such as its movie business and its traditional TV assets. Both of these were described as assets of long-term value and great cash generators. He also announced the decision to scrap the direct-to-streaming movie Batgirl, stating ‘this idea of expensive films going direct to streaming, we can’t find an economic value for it, and so we’re making a strategic shift’.”
These developments suggest the market for streaming services has reached a transitionary period. Netflix’s model of chasing new subscribers at all costs – copied in the past by rival platforms due its seemingly unstoppable success – may now be on the wane. Instead, Jones says that the model for streaming may become more like that for traditional television, as media companies scramble to generate new streams of advertising revenue. “It’s clear that streaming is here to stay, but it may end up looking like the cable TV it was supposed to replace,” she says.
“Cord cutters looking to get away from bloated cable packages and rising fees are facing a future of … bloated streaming apps and rising fees – or reasonable fees and ads.”