What's Next for Netflix?
The streaming giant is betting on new products to sustain subscriber growth.
Netflix reported a decline in subscribers causing Wall Street investors to panic. The stock plummeted 35% to about $225, down from its November high of nearly $700 per share. I’m unfazed by these reports since Netflix has untapped monetization avenues with plenty of room for growth.
Netflix.shop: Shoppable Entertainment is Coming
The streaming giants' e-commerce store sells merchandise from popular shows like Stranger Things and Cobra Kai. It’s the company’s first attempt at integrating its content into e-commerce. I predict Netflix will integrate the shopping experience directly into its actual content through a viewing mode that can be toggled on/off. Netflix can aggregate data from its original productions and give it shopping utility. Viewers could find out what cast members are wearing, what types of cutlery are used in cooking shows, etc. Users could then buy it directly on the platform generating billions of dollars in revenue.
Netflix is Acquiring Movie Theaters
Netflix is renovating The Egyptian Theater in Hollywood later this year. This will mark the company’s fourth movie theater location. Netflix is charging $12 for tickets and offering free popcorn and drinks. An interesting approach considering that existing movie theater chains make most of their revenue from concessions.
It makes sense for Netflix to acquire movie theaters. Netflix would have a competitive advantage in the streaming wars by offering notable directors a theatrical release in addition to a lucrative lump sum payment. More importantly, filmmakers still want their movies in theaters, and viewers love the theater experience. The pure streaming release model is not sustainable. Netflix is losing billions of dollars a year creating content. Without perpetual new content, subscriber rates would begin to subside.
The key to streaming services' success is exclusivity. Distributing exclusive Netflix content to third-party theaters doesn’t make sense or benefit anybody. Like the old days of Hollywood, theaters will be owned by studios. Netflix already building its theater arsenal is a testament to the company always being ahead of the curve.
Although… this is pure speculation. CEO Reed Hastings has spoken out against buying a theater chain saying, “We want to really focus on internet entertainment and trying to just continue to improve our series, our films to make them the best in the world.” Then again, Hastings was adamantly against advertising on Netflix, but a new low-cost ad-supported tier is being discussed internally to appease disconcerted shareholders.
Original African Content
Netflix began investing capital into African-made programming back in 2016 to find stories that resonate with its African market. Its original African programming has received praise across the continent, estimating that African streamers will bring in $1.2 billion a year by 2025. Africa has seen an explosion in investment from tech companies like Amazon, Apple, Google, and Twitter, pouring billions of dollars into the continent.
Podcasts
The former head of content for Apple Podcasts, N’Jeri Eaton, was hired by Netflix to lead podcasting for the company’s marketing division. Netflix's footprint in podcasting will only continue to expand throughout the decade.
Gaming and Interactive Content
This is perhaps Netflix's best opportunity for monetization. You can read more about that here.
New Revenue Streams are Essential for Netflix to Succeed
It’s imperative Netflix finds alternative ways to monetize its service since its subscriber rate is bound to plateau. The streaming giant already has over an astounding 200 million household subscribers across more than 130 countries, and estimates another 100 million people are using the site with shared login information. We’re talking households. Netflix easily reaches a billion viewers monthly.
For the first time in over a decade, Netflix lost subscribers, essentially blaming “illegal” password sharing for the precipitous decline. Still, we should all be cognizant of the massive influence Netflix has on culture. This is known as “The Netflix Effect.” For example, the rise in popularity of Formula 1 racing can be directly linked to the Netflix original docuseries Drive to Survive, which took viewers behind the scenes of the racing world. In 2018, F1 viewership was about 547,000. After the docuseries launch, it increased by 18% to 672,000. By 2021, F1 viewership was at 934,000- an astounding 54% increase. Netflix has proven storytelling has a tremendous cultural impact.
Netflix has attained a level of brand loyalty where people use the company as a verb. They’ve raised prices five times over the last seven years, and the subscriber count keeps growing. It’s sure to be a tumultuous time for Netflix as these new services mature, but I believe this is just another Netflix product transition.