Will Netflix stay afloat in the battle of streaming?
Contributors: Aya Zeini, Baraa Abo Ghouch, Eslam Abo Al Hawa, Layan El Kaissi, Marian Abou Fares, Mhammad Nahle.
For the past 25 years, Netflix has always been the largest streaming service in the world as it holds more than 10% of the global internet traffic. New players have joined the competition and they are growing rapidly, and the question is: How will Netflix be able to maintain its dominant position?
In Q1 2022, Netflix lost around one million subscribers, and this was the first drop in number of subscribers for the past 10 years which led to a huge drop in its stock price and market share as it went down from 690.3 till 190.4 within 7 months only. On the other hand, Netflix income has always been increasing especially from 2022 as it was 2,219 where it became 4,500 but in 2022 it decreased for the first time by 1.6% and this is where they felt there is an urgent need for call of action.
One of the problems Netflix was facing is relying on licensed titles which counts for 97% of the content in 2016. After they started losing those licensed titles, they had to remove them which led to losing a lot of subscribers. ‘Criminal Minds’ is the top-watched licensed show on Netflix as of 2021 and it was later removed due to licensing issues which was disappointing to Netflix users and as per our survey, 51% users canceled their subscription after they hooked on a Netflix series and found it was removed. By 2022, they increased the percentage of produced original titles by 50%. They followed this strategy of spending a lot of money into making originals to fuel their subscription growth especially after subscribers began to hemorrhage.
Netflix is also struggling from the competition. In Q2 2022, Disney platforms had 27.3% (year over year) growth of subscribers compared to 5.5% for Netflix. Can you imagine their growth in coming years?
Despite the fact that Netflix is struggling to maintain its trajectory, they still have the biggest overall subscribers base and have a history of innovation that is going to be very difficult for any competitor to defeat. Currently, Netflix is planning to introduce a cheaper membership that includes advertising to grasp more subscribers. Although this is a good step to start with, but they still have to work at being nimbler and more dynamic with packaging and bundling so most people don’t like to be distracted by adds while watching and this has been validated in our survey. At the same time we found out that 72% of our surveyed Netflix users 72% aren’t willing to switch to another platform and 82% said they enjoy original titles produced by Netflix.
This proves the point that Netflix users are loyal and didn’t give up on the platform but rather they demand improvements to meet their needs. Therefore, if Netflix can continue to produce original titles that creates a significant reaction from users and impress them, users will find value in their membership. Moreover, investors should keep an eye out for Netflix’s following releases and viewership to see if the platform is still breaking records and satisfying viewers. This is a streaming war, if Netflix decides to resist and fight back, the chances of Netflix falling below their competitors are slim.
