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When Netflix (NFLX) – Get a free report The company was an honor roll, initially switching from offering remakes and old movies to producing its own content. In many ways, the company is the Warner Bros. Discovery’s followed the lead. (WBD) – Get a free report HBO, a cable giant focused on quality.
HBO was never an audio game. He’s always kept subscribers by having a few huge shows that people feel they need to subscribe to see. “The Sopranos”, “Sex and the City”, “The Wire”, “Six Feet Under” or recently “Game of Thrones”, HBO was a show of honor that you will not find anywhere on cable or broadcasting.
In some ways, that’s an expensive business model (dragons aren’t cheap) but in other ways it’s cheap. Having a few honor programs that will satisfy and grow your subscriber base will cost less than trying to do volume shows.
It’s a lesson Netflix learned in its early days. The company has built its career by producing a handful of shows — “House of Cards,” “Orange is the New Black,” “The Ozarks,” “Stranger Things” and a handful of others — that captivate audiences, building a word. Mouth.
Netflix has fallen from its prestige model of producing programming to please the company’s algorithm, not water cooler conversation. That’s why the streaming giant puts out a seemingly endless stream of shows that no one has, isn’t talking about, or telling their friends about.
Now, when the answer should be obvious to Netflix — produce fewer shows, but make what you produce fit the prestige TV model — the company continues to go the wrong way.
Netflix
Netflix continues to make its programming cheaper.
People pay for a premium program. Walt Disney (DIS) – Get a free report He revealed this through his Disney+ streaming service. The channel offers top-rated must-see shows that people are talking about, and while it’s not yet three years old, it’s enough to make Disney+ the number two streaming service with two-thirds of Netflix’s subscribers.
For decades (before the current ownership mess), HBO has demonstrated that consumers will happily pay premium prices for premium television. Disney built on the success of that model with Disney+, setting ad-supported pricing for the second tier of all services.
Pricing matters when you have a product of questionable value. Hulu offers reruns, a limited slate of mostly low-budget shows, and no tentpoles for people to watch. The same can be said about Comcasts. (CMCA) – Get a free report Peacock and Paramount Global (b) – Get a free report Paramount+
These streaming channels don’t have Disney’s slate of Star Wars and Marvel shows to drive subscribers. Sadly, that’s now true for HBO, which is why it once launched an ad-supported version of its premium offering, which Netflix did.
You can’t be cheap and premium. This is why Disney theme parks never offer discounts on tickets (except for certain ones for Florida residents). The ad-supported tier makes Netflix and all these other services unique because they’re a bargain at $15 or $20 a month if people show they want to watch.
Now, Netflix has signaled that even cheap might not be good enough.
Netflix is open for free.
Paramount has made a lot of money with its free Pluto TV service. Pluto offers a collection of old reruns that people can clearly see. It’s a money-making strategy, but next to “Soul Man,” “Who’s the Boss,” and “Air Wolf,” an endless supply of shows no one has ever heard of, it’s a money game, not brand building.
Pluto, like Roku Channel, and Amazon’s AMZN Freevee are free, ad-supported streaming channels. They recycle old content as a way to sell ads. It’s probably a smart strategy (although it’s hard to see how it’s sustainable), but it’s a very different model than Netflix had.
It’s okay to bundle a basically free (and free) program for people who want that, but don’t want to do it with your core program. Netflix CEO Ted Sarandos answered a question about the launch of the Instant Channel during the company’s fourth quarter earnings call.
“Yeah, look, we’re open to all these different models that are out there now, but we’ve got a lot going on this year, with the launch of paid sharing and advertising and continuing on this board. The content that we’re trying to drive to our members. So we’re definitely keeping an eye on that part,” he said.
The issue isn’t that Netflix is getting into the space faster: the petitioner claims that Netflix has ten years to work on its own intellectual property. Essentially, that company would weaken the salary wall — albeit for older programs — at the core offering.
For those who haven’t seen “Stranger Things” or Adam Sandler movies, they are new. That’s a core part of Netflix’s business model. Making some shows available for free lowers their cost to drive future Netflix subscribers.
Netflix had a business model that worked, which was sustainable as long as they made great shows that people cared about. Now the company has lost its creative ways and management has shown that it doesn’t even want to bring back the appointment television that people are talking about.
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