The bottom is dropping out of Netflix

My adorable friend says this is fancy!

Netflix reported that it has lost 200,000 subscribers in the last quarter, which was bad enough. Even worse, it expects to lose another 2 million subscribers. The stock plummeted 35 percent yesterday, losing $50 billion — or more than Elon Musk offered for Twitter — in market capitalization.
What the hell is going on?Most people see this as inevitable for a company that has been spending billions on content in an effort not only to stay ahead of the competition but to defeat it. But Netflix is not Apple or Google or Amazon. It may be able to be the leader in the streaming industry, but it cannot wipe out most of its competitors. It cannot become a faux-monopoly.

Netflix itself partially blames password sharing, but that’s been a thing since Netflix switched from DVDs to streaming all those years ago. Two hundred thousand subscribers did not suddenly quit their subscriptions and start using their friends’ passwords. I think this has more to do with the combination of three things: the binge model, churn rate, and rising subscription prices.

With a rise in competition from other streamers like HBO Max, Apple TV+, Disney, Amazon, and Paramount+, and the cost of all the services combined (especially after Netflix’s price hike), subscribers are far more likely now to jump from one streaming service to the next from month to month depending on what content is available. Netflix’s binge-watching model and the fact that it churns out fewer cultural hits makes this much easier. They’ve been hoisted by their own petard: Why pay $20 a month for Netflix when you can pay $20 every four months and watch the final season of Ozark, the second seasons of Bridgerton and Witcher and Squid Game in one month, and move to another streamer the next month and watch all of their offerings? We’ve only got so much discretionary income, and with inflation rising, cutting a subscription service here and there feels very freeing.

The subscriber base for HBO Max (and presumably Apple TV+), meanwhile, have continued to grow because they produce shows like Severance and Ted Lasso and Succession that viewers talk about week-to-week. I could kill my Netflix subscription right now and probably wouldn’t miss it, but there are 3 new episodes of Apple TV+ I have to watch every Friday, and 4-5 shows I have to watch on HBO Max every Thursday and Sunday. Over on Netflix, the second season of Russian Doll dropped yesterday. Reviews have been mediocre. Would that be enough to lure me back? No. (If it weren’t for kids, Disney might fall prey to this, too, by only producing one major series at a time, and if that series is mediocre (ahem, Moon Knight), that’s 2 months we can kill).

Netflix needs to cut back on its spending, produce content that people will talk about, and release it weekly. Instead of producing two mediocre shows and an algorithmically designed movie every single week, they could make three excellent series and three much-talked-about movies every two months and scale back on spending from $17 billion to $10 billion a year and actually grow — and maintain — their subscriber base. The top show on Netflix this week has been the dumb reality series The Ultimatum, which I’m sure brings in a lot of eyeballs but not a lot of new subscribers, and ain’t no one going to subscribe to Netflix six months from now for a show with a short shelf life. Netflix should understand long shelf lives. Mark Wahlberg’s modest 2005 hit Four Brothers is a regular fixture in their top movies.

Another thing that Netflix might consider is this: Discounts for year-long subscriptions. I’ll admit, I have been a sucker for this on both Paramount+ and Peacock. They drop two shows I want very much to watch at the same time, and offer a year-long subscription at a discount — 12 months for the price of 10, for instance — and I’m probably going to take it, even if, six months later, in between seasons of Yellowstone spin-offs and The Good Fight, I wish I could cancel for a few months. I’d almost certainly pay for a year of Netflix at a discount, reasoning that I’ll watch something at least 10 out of the 12 months (note that this is also the model for the New York Times, Washington Post, and the other major newspapers, who not only get my year-long subscriptions but can run ads alongside their articles).

In the meantime, the cuts at Netflix are already coming. Netflix animation is firing executives and staff, and canceling series before they go into production, like Bone, Toil and Trouble, and Roald Dahl’s The Twits . It’s the first of what I suspect will be a lot of cuts. Their next step should probably be to pull back on those $200 million blockbusters, especially since they can probably get nearly as many eyeballs (and subscribers) with a better written and more modestly budgeted $40 million movie. Or by spending $2 million for the licensing rights to Four Brothers. Netflix is very good at throwing money around in their film division, but they are not very good at producing movies with long shelf lives. I mean, honestly, Four Brothers has probably been watched half as much as The Adam Project at 10 percent of the cost. (I don’t like Mark Wahlberg, but I am guessing that deals with Wahlberg and Adam Sandler have been two of the few that have actually been profitable for the service).

Or, I guess, they can just throw ads at the problem, continue raising subscription prices, and crack down on password sharing. Then again, if you’re borrowing someone else’s password, Netflix may not be valuable enough to warrant a subscription in the first place — at least not one that you pay $15-$20 a month for. Also, bring back Mindhunter and Santa Clarita Diet and air them weekly. That’s 3 months you’ve got my subscription dollars, guaranteed.

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Dustin is the founder and co-owner of Pajiba. You may email him here, follow him on Twitter, or listen to his weekly TV podcast, Podjiba.

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