Netflix is ​​facing a dystopian future in which hits do not guarantee growth

Netflix seems to be winding back by the end of 2021, with a Korean dystopian drama. Squid game filming millions of viewers and the first 150 programs ready to be released, including Do not look up, featuring Leonardo DiCaprio and Jennifer Lawrence.

The company said, “it is the most powerful record of all”.

But the new star-studded production was not enough to give Netflix a big boost for subscribers in the fourth quarter. A pioneer in the media said on Thursday that 8.3m new subscribers had signed up for the fourth quarter, the lowest number added since 2017.

To make matters worse, it predicted an increase of 2.5m subscribers in the current quarter – a decrease from 4m last year and a decrease in its first quarter in the last five years. Advertisers lost the item on Friday, sending the shares down about 22% to $ 397.69. They have fallen by more than 40 percent since the height of Squid game mania in November.

Continuing with weak guidance, the company’s performance raised serious questions about its business. Among them: what happens if the new popular shows are not enough to attract more subscribers to Netflix?

“Squid game came out last week [the fourth quarter] started, but the biggest regular hit on Netflix was not enough to add subscribers, “says Laura Martin, a specialist at Needham & Co, who owns a retail business. .

Netflix is ​​expected to spend $ 18bn on content this year, according to Morgan Stanley estimates, looking to continue competing with competitors including Disney Plus, AT & T’s HBO Max, Apple TV Plus, Amazon Prime, ViacomCBS ‘Paramount Plus and others. FT says eight U.S. media companies will spend $ 140bn on what is happening this year as sports wars intensify, with experts expecting to increase revenue over the next few years.

Advertisers seem to be recovering from the high cost of advertising – as well as the long shelf life of the business. Following a Netflix report, MoffettNathanson researchers found that the “rotting” of their streaming was “extremely fast”, especially when popular programs could be eaten overnight.

This means that “advertisers have to spend a lot of time on new products to catch and retain new members, and any reduction in revenue that leads to a reduction” in the growth of subscribers, the company said in a survey.

“We doubt whether marketing is a good business or not,” says Michael Nathanson, an expert at the company. “A ton of new things are needed.”

Netflix said its top spending earnings exceeded 8 percent in the fourth quarter, down 6 percent compared to the previous year. Raising its limits could mean wasting less money on its content, which many find impossible due to the increasing competition in the advertising market.

Netflix raised its prices in the US this month to $ 15.50 per month from $ 14 – $ 8 per month offered by Disney Plus. Netflix officials confirmed last week that subscribers were down in the fourth quarter, and said plans to break free and make free money this year are a good one.

Netflix, Disney and other advertising companies found significant subscription benefits during the closing period of 2020, but a return to normalcy has slowed growth.

The company criticized the disappointing growth of subscribers among other things due to the “economic crisis in several countries in the world”, especially Latin America. It added that competition “could disrupt our slow growth”, acknowledging the need for it to face challenges from other promotions. But it added that it continues to grow in any of the countries that players have developed.

Reed Hastings, head of Netflix, said it was difficult to know what was reducing because “Covid has brought a lot of noise”.

But Martin said Netflix underestimates the impact of rising competition on its growth. “Another problem is that Netflix doesn’t think they have a problem,” he said. “I know the competition is real but they still haven’t achieved this.”

He also said that the advertising market will be stable once the consolidation period, which he thinks will take place three years or so ago.

“Three [streamers] He needs to run out of money and three will survive, “he said.

For his part, Hastings said there was no reason to doubt the company’s performance. “We are living in peace,” he said.