Netflix crisis: what the loss of subscribers means for the streamer

Imagine it was a year ago, when the pandemic-fueled streaming revolution (when is a pandemic good for business? When your business depends on people staying home) felt the first wave to be the new paradigm that ate the world. And pretend, in this spring of 2021, you were asked to imagine how a headline from the movie industry of the future might read. You would probably have predicted something like this: “For the first time, every Oscar nominee is coming from a streaming service. Or maybe this: “Movie theaters: still there, but no longer driving the action. »

You probably wouldn’t have found something like this: “Netflix buys Alejandro G. Iñárritu’s ‘Bardo’, plans worldwide theatrical release.” »

But it is the title which appeared on April 27 in Variety. Netflix has already given token theatrical releases to “The Irishman,” “Roma,” and “The Power of the Dog.” But not with a title six months before the facts trumpeting a worldwide theatrical release. Sorry, but that’s not Netflix’s brand.

This particular headline wasn’t about Netflix’s shocking subscriber base attrition — the fact that the company lost 200,000 subscribers in the first quarter and expects to lose another 2 million in the second quarter. Yet those stats, reported the previous week, were actually the deep news story about Netflix’s commitment to giving “Bardo” a full-scale theatrical release. The two titles conveyed different aspects of the same thing: that there are now powerful countervailing forces to the streaming revolution.

Why did the loss of Netflix subscribers happen? A perfect storm of reasons, led by the war in Ukraine (Netflix cut its services to Russia), but also driven by the fundamental fact that Netflix now exists in the hyper-competitive world it created – that is, say the rise of streamers like Disney+, Apple TV+ and HBO Max. (There’s also the reality of password sharing, but that sounds like, in the scheme of things, a rather hopeless rationalization.) The reasons matter, but the bottom line is that, as Netflix navigated what is arguably the worst crisis of his 25 years. story of the year picture of Netflix as the unstoppable powerhouse of the entertainment industry’s new era has taken a major hit. And if those titles provided the words, then last week’s CinemaCon, the annual gathering of the movie industry, added the music, all wrapped up in a hit single that read: “Movie theaters are back, baby! ”

Not that they ever left. But the fading of movie theaters – the decadence of the theater experience and, yes, the potential death of movie theaters – has become, over the past two years, the most ominous specter to haunt the film industry since the rise of television in the United States. early 1950s. At times, it struck terror into the hearts of almost anyone who loves this industry. And that’s because it’s all about the unknown.

But it’s also, of course, about what everyone knows, at least in their cinephile reptile brains, that people sitting at home watching a “first-run movie” on television are, simply put, a bad business plan, because it’s a plan based on downgrading the fundamental magic of the product itself: making it less exciting, less essential, less mythological. For movies, make no mistake, it’s all about mythology. (Just ask George Lucas, Frank Capra, or the creators of “The Batman.”)

And so, in this case, it’s Netflix.

When it comes to the question of what exactly movies will look like (not just this year, but five years from now, 10 years from now, 30 years from now), Netflix and the film industry as we know it have been engaged in a mythology war. In the real world, movie theaters and streaming services can and will coexist. But how? This will ultimately be decided by the viewers. And the news, over the past two weeks, that Netflix is ​​lethal — not a god, not an invincible monolith, but a business like any other — could end up having a powerful impact on viewers’ perceptions of the entertainment world in which they want to live in.

The most famous quote about the movie industry – “Nobody knows anything” by William Goldman – does not mean that everyone is stupid. This means that, as Goldman noted, “Not a single person in all of filmmaking knows for sure what’s going to work.” What people know keeps changing; the way to hit today is not necessarily the way to hit tomorrow. It’s the nature of business. And that kind of shifting dynamic is happening right now in the Gladiator Contest that’s streaming versus theatrical.

At CinemaCon, the film industry declared its firm commitment to providing theaters with a full slate of movies (not just tentpoles, but dramas for mature audiences), and in doing so, they overturned current conventional wisdom. But it was the right choice. As the pandemic slowly but surely dies down, there is strong evidence to back up the idea that movie audiences want more than IP extravaganzas. Just look at the astonishing success, exclusively in theaters, of a film as radical as “Everything, everywhere, all at once”. It may be true at CinemaCon that the death of the day and date was greatly exaggerated, but there’s no denying that the day and date took an extreme beating. Opening a movie on a streaming service the same day it opens in a theater is – isn’t it obvious? – a way of devaluing this film. And if that’s true, then everyone loses.

But what Netflix sells, and mythologizes, is that a movie seen at home has as much value as a movie seen in the cinema. It’s just a different type of value, which we all have to get used to. Netflix has managed to define the streaming revolution by its own preeminence. And the pandemic allowed us to give this model the ultimate road test of a new normal. “Netflix and Chill” morphed into “Stay home…and why leave?” Already? Many bought into this fantasy of what life would be like now.

It was a way of thinking encouraged by Netflix, which took a very real technological innovation, which does not go far, and inflated it into a kind of fairy tale. The mythology of motion pictures begins with the fact that they are bigger than you. You literally look up to see them; you sit in a crowd to experience it; at their best, movies dance through your head to the point of rewiring your brain. (That’s what great art does.) But what Netflix did, brilliantly marketing itself as the only streaming service you’ll ever need, was to replace the vastness of movies with the vastness of Netflix. .

Mythology said: Here in your own home is the only megaplex you’ll ever need – the Netflix smorgasbord. And since Netflix’s much-vaunted business model was literally meant to rewire the entire world, enrolling every consumer on Earth as a subscriber, once you became part of the Netflix entertainment potato family, you would now see what everyone was seeing, which is part of the dream of what movies are. Streaming would replace cinema because Netflix would replace movies. And even when Netflix’s competitors arrived (Disney+, Hulu, Apple TV+), it didn’t change the paradigm of how we thought about streaming, a larger-than-life model that Netflix planted on the map. and possessed.

But when Netflix had its bad first quarter, losing subscribers and also, for the first time, falling below 50% market share for the streaming world, the scale of their mythology turned out to be kind of of fantasy of man behind the curtain. . No, it turned out that their famous assortment of choices, dominated by a high percentage of mediocre products, was not going to take over the world. Netflix was not going to replace movies. There were of course other services, other choices. But more than that, the choice to stay home to watch a movie wasn’t going to feel so fucked up. dictated. As Pivotal Research Group analyst Jeff Wlodarczak noted, “Streaming appears to be almost fully penetrated globally post-COVID. It sounds like a statement of success, but it actually represents a deep undermining of the Netflix mythos. Fully Penetrated! More room for growth.

Streaming, in other words, is here to stay, but it’s not necessarily going to keep getting bigger and bigger. It has changed the world of entertainment and will continue to do so, but that world is subject to other dynamics, including the reopening of movie theaters, which is driven by something as primitive and eternal as our desire to watch. movies. in the comfort of our own home. To know: our desire to get out of the house. Netflix’s poor first quarter did more than just depress its stock price. It blew a hole in the corporate mythology. And that’s good for movie theaters, which are the rightful home for what we call movies, which need their own mythology to survive.

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