Can Netflix compete with real world?

The streaming wars took a savage turn this past week. Netflix’s earnings report disappointed investors. CNN+ dropped out of the game entirely, just a month after launching. The result has been a wave of brutal selloffs, making Netflix the worst-performing member of the S&P 500 this year to date.
A decade of seemingly perpetual growth came to a halt with the loss of some 200,000 subscribers. You might need to grab a magnifying glass to see them, though, because ultimately that’s just a 0.09% decline.
Had it been an increase, rather than a decrease, the move would far more likely have been reported as “static,” rather than a devastating plunge. So why are people ditching their Netflix subscriptions?
It may partly be a product problem. “Netflix has stopped meaningfully differentiating itself from its competitors over the last two years,” former Hulu
executive Alex Kruglov told Roy Bahat, head of Bloomberg Beta, in a recent Twitter Spaces. “Great competitors like Disney+, HBO Max, Apple and Amazon are putting out phenomenally good shows, so having a distinct place that has truly great shows is no longer a Netflix differentiator. Having a lot of stuff is no longer a differentiator — Amazon has that, too. And when it comes to user experience, everyone essentially looks exactly the same.”
Just before the Netflix news broke, market research firm Kantar found that, in the UK, more than 1.5 million people cancelled memberships to streaming services during the first quarter of 2022. About a third of those cancellations can be traced back to the cost-of-living crisis. With inflation forcing prices of everything from food to energy up, streaming is increasingly an unaffordable luxury for many.
In contrast, consumer giants P&G and Nestle have had a good quarter, despite Nestle raising prices by the most in about 15 years. After all, while bingeing season 5 of “Selling Sunset” is optional, people need to eat and wash their hair.
Still, Andrea Felsted writes that Netflix’s experience offers a warning: Though people are still purchasing beers and baby wipes now, if things tighten up even more, there’s a risk fancy condiments will be the first thing out of the shopping basket.
A recent survey found that most consumers plan to cut back on dining out, entertainment and premium groceries. A quarter will economise on streaming services.
The news no doubt puts others in the streaming game on edge. CNN+ didn’t survive the week, and the shares of Spotify, Disney and Paramount — to name just a few — also declined. But there’s at least one app hoping to escape falling trap to the same forces.
So far video streaming appears to have built on the Covid bump, but consultancy MiDIA has seen total attention hours devoted to entertainment time falling.

—Bloomberg