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Netflix still on the rise, despite everything

Netflix still on the rise, despite everything

The most popular streaming service adds a few more million subscribers, but can it keep doing it in 2022?
Netflix expanded its reach for yet another year, but the service will probably not have an easy time repeating that in the years to come. Unless… (Image: Dima Solomin, Unsplash)

The term “too big to fail” has historically referred to financial institutions, but it seems like Netflix is keen on proving that it could also apply to certain… entertainment institutions, maybe? The company announced its earnings for the last quarter of last year (as well as for 2021 overall) and while the information in its report is not all positive, it’s not all doom and gloom either. In short: Netflix is still expanding its userbase but how much longer it can do that for, well, remains to be seen. What the company plans to do when it hits that wall, even more so.

First, numbers: Netflix managed to add no less than 18 million new subscribers globally during 2021, which is a far cry from the 37 million added during 2020. By looking at what’s also happening in the Disney Plus camp, though, it’s obvious that the pandemic boom is indeed over for entertainment subscription services. Those will have to make do with slower growth now. Of those 18 million new Netflix subscribers for 2021, about 8.3 million were added during last year’s Q4 — quite close to, but not on target with the 8.5 million subscribers Netflix and Wall Street expected (hence the latter’s negative reaction to the former’s stock price). Most new subscribers belong to markets outside the US, as is the case during the last 2 or 3 years: a trend that everyone expects to continue.

Not only are some of the streaming services competing with Netflix very strong, but their Hollywood ties make their content exceptionally compelling for new subscribers. (Image: Disney)

So, to put all this into perspective: no, Netflix has not peaked… yet. The service hitting 222 million subscribers globally is something many of us expected the company to accomplish at some point in Q2 2022, so it’s a notable achievement. But Netflix itself admits that it expects to only add around 2.5 million new subscribers in the current quarter (down from 4 million during the same quarter last year), as its slate of shows and films scheduled to appear until the end of March is not as strong as the ones offered during previous quarters. The company also freely admits that in the market it practically created — that of entertainment content streaming — there’s now more competition than ever: Disney Plus, Amazon Prime Video, HBO Max, Apple TV Plus, Hulu, Peacock, Paramount Plus and others all want a piece of the same pie.

What Netflix will not admit, but a number of analysts have long maintained, is that there’s simply not a lot of room for growth available to the service anymore. A choice the company made a few days ago proves as much: Netflix raised the prices for all three of its subscription tiers in the US and Canada yet again because, well, it cannot attract many more new subscribers there: almost everyone who could be a Netflix subscriber in North America, probably is. Raising the service’s prices was the only option the company had so that “it can continue to offer a wide variety of quality entertainment options” (probably including its expansion to gaming in those options).

Netflix offered a few films and TV shows worthy of mainstream success in 2021, but it needs a steady stream of such hits if it means to compete with the likes of Disney Plus or HBO Max. (Image: Netflix)

Netflix may be able to add around 15 million new subscribers to its global user base during the next 12 to 18 months, approaching an impressive quarter of a billion subscribers at some point in 2024. Almost all of those new subscribers are expected to come from international markets (it’s no accident that Netflix now produces a lot more non-English content than it used to). But this will come to pass provided that the service doesn’t lose many subscribers in the meantime, doesn’t raise its prices again and doesn’t produce a much smaller number of big-budget exclusive films and TV shows than it currently does. That is not a small list of prerequisites. What’s more, it does not take into account the rise of competitive subscription services, especially of Disney Plus and HBO Max.

There are some steps that Netflix could take in order to attract quite a few new subscribers from all territories (including the US). There’s the much-discussed possibility of the company doubling down on password sharing, a common practice among consumers that is costing Netflix a lot of money if research numbers are to be believed (it’s estimated that anything between 25% and 35% of subscribers uses other people’s accounts without paying a dime). Such a move could seriously backfire on a PR level, though. There’s also the standing issue of the overall quality offered by Netflix’s content library, which is far lower than many people would like. Focusing more on delivering films and TV shows that consumers would actually want to watch and consider subscribing for — rather than just producing a lot of mediocre, forgettable content — would help. The company’s expansion into gaming would be much more meaningful if it was combined with cross-media productions, too, mid-term as well as long-term.

Netflix will have to make a number of changes in its business approach at some point in order to keep expanding. It will not be easy. (Image: Alexander Shatov, Unsplash)

Whatever the direction Netflix decides to take in the future, one thing’s clear: quite a few changes will have to be made if the company means for its service to remain the most important one in the video streaming business. The company can’t just pump out a lot of content every month and hope for the best anymore. It will have to get creative, get smart, most probably take a few risks… or Netflix could very well watch its current advantage — the one its significant headstart afforded it — lose its importance faster than any of us thought possible. There’s not a single company in the tech and entertainment sector that proved to be “too big to fail” yet, after all, is there?

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