Streaming drama could be a horror show
February 14, 2022
This columnist’s conviction that Netflix’s business model is fundamentally a plate-spinning act, with the same potential mishaps, has waxed and waned as results have continued to boom, with just the odd bump in the road.
But the conviction has never gone away completely, even as the company seemed to reach the status of 800lb gorilla – it could sit where it wanted, it was too big to fail… etc, etc. Certainly, it has a share that could likely be attractive enough to a Google or an Amazon so that its shareholders would still do more than OK. But does it have a clear run to independent, permanent, global success?
It doesn’t, and not least because its admirable innovation and success has forced all serious content companies into the D2C game. The market is now overheated, over supplied, saturated. Like in any market the effect is embedded inflation in the price of supply – and content is a supply that you can’t effectively hedge for – and pressure to moderate retail prices.
These are unwelcome pincers to any business. Add on the $12 billion+ of net debt, some of it already nominated junk, the pressure on household budgets around the world, and rising interest rates to combat inflation, and you’re looking at a potentially unsettling position. The stock has fallen 30 per cent in the last year, and it doesn’t seem likely there will news along soon to see it head north again.
With a business model that made a keystone of having no long-term customer commitment, these market conditions seem tailor-made to trigger waves of promiscuity in subscribers – bowing out for months at a time when they see the content cupboard as bare. Netflix taught them to binge, so if something does come along that they can’t bear to miss, they can always jump back in for a month of concentrated catch-up.
All the streamers are in the same boat, and it seems highly unlikely the market will eventually shake out to more than four, (or even three?) global cross-genre services. Is it now possible that an independent Netflix as we currently know it, won’t be one of them?