Netflix’s earnings could reveal millions of lost subscribers — now it’s pivoting to ads for growth, but might lose its identity
Netflix is down... in more ways than one. On Friday, the struggling streamer was briefly down for some users — putting shows like "The Umbrella Academy" and "How to Build a Sex Room" out of reach. But downtime isn't the Flix's only problem: the stock's down 70% this year as subscriptions sag and revenue growth slows.
- Skip intro: Probably what Netflix wishes it could do with quarterly earnings, which it reports tomorrow. If first-quarter results are any indication, things aren't going well.
- Sub-pocalypse: Netflix lost 200K subscribers when it was expected to add 2.5M. Blame post-lockdown #subscripturation.
- Next episode: Netflix said it expected to lose 2M subscribers in the second quarter (aka: the one it reports tomorrow). This year it’s cut 450 jobs.
Stranger things’ve happened... In 2019, Netflix CEO Reed Hastings said his streamer would never do ads, “period.” Now: Netflix is doing ads. In April, it announced it would launch a cheaper ad tier. The goal: attract and retain subs. High prices (#flation) + subscription overload (#subscripuration) have made it harder for consumers to afford multiple streamers.
- Soft landing: Last week Netflix said it was partnering with Microsoft to build out ads. Microsoft's ad biz isn't as big as that of its rivals, like Google and Comcast, but it's one of the few big techies without streaming ties.
- Hard pivot: This year Netflix has hiked prices to make up for sagging growth and support its original content spend, which ballooned to $13B+ last year (“Stranger Things” season four reportedly cost $30M per episode).
To keep your identity, you may have to lose it… To maintain its rep as the #1 streamer famous for original content hits, Netflix must do something we thought it never would: Hulu-fy itself with ads. After its first subscriber loss in a decade, Netflix had to choose between cutting down on content spending or cutting the cost of its service. Ads could be a big profit puppy, but might cost Netflix its frictionless prestige.