Netflix is in a Death Spiral – Here’s Why

Netflix is in a Death Spiral – Here’s Why
Photo by Glenn Carstens-Peters on Unsplash

Do you remember what television was like in the late 90s? The early 2000s? This was the era of VCRs and DVDs. If you wanted to watch a movie, you had to go rent it from Blockbuster. A weekend of fun was when your parents rented two or three, ordered a pizza, and everyone sat on the couch to watch together.

The alternative was cable- an expensive service that shoveled dozens of channels of garbage straight into your home. The exact opposite of something like, say, Fair Go slots. The cable companies forced you to buy bundles of channels, regardless of whether or not you ever intended to watch even half of them. These shows would then be constantly interrupted with unskippable commercial breaks for two to three minutes, which adds up quickly. A forty minute television show ends up being a full hour-long experience. A third of your time is wasted with advertisements!

Netflix was around in this era, although not in the format we would recognize today. Anyone older than a zoomer might remember that Netflix started as a DVD rental service. You would go to Walmart or the grocery store or whatever, and you would find a vending machine-like device where you could rent whichever DVDs you liked, then bring them back whenever you wished.

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That was Redbox, not Netflix. Netflix decided to try something similar, except through the internet (this was in 1998 when the Internet and online services like Amazon were only beginning to explode). Little did anyone realize that this company would radically change digital entertainment forever.

Actually, YouTube had a big influence on this too. Netflix originally intended to create a physical box that one could download movies and watch through their home television. YouTube, however, had proven that streaming video content was not only feasible but immensely popular. The box was scrapped, and Netflix offered unlimited streaming to rental subscribers. By 2010, streaming was separated from the DVD rentals.

Around this time, Netflix exploded. If you wanted to watch something, you went to Netflix. Some of the biggest shows on television were on Netflix, like Breaking Bad. All the big studios had their content on Netflix. This was a coup-de-gras to cable services. People could watch whatever they wanted, whenever they wanted, for a low price.

There were no ads, and you didn’t have to wait for reruns if you missed an episode. When AMC was considering canceling Breaking Bad, Sony was able to push Netflix to release Breaking Bad on its service all at once. Viewers were then able to binge the first three seasons and catch up, so AMC’s audience grew drastically when they released the fourth season. In other words, having a show on Netflix was not only great for Netflix’s subscribers but also great for the studios themselves.

Netflix became a digital juggernaut in the entertainment industry. According to Wikipedia, Netflix was ranked at #474 on the Fortune 500 Rankings back in 2015 and reached #115 last year in 2021. Netflix is a household name, and most of us watch the latest shows almost exclusively through streaming services. So with this immensely profitable formula for success, why on Earth would I say that Netflix is in a death spiral?

Netflix in Q1 reported a loss of 200,000 subscribers and project that they are going to lose another 2 million in Q2. The question is, why?

Get Woke Go Broke

The first and foremost problem with Netflix is its insistence on promoting and creating shows along a politically biased line. By its nature, this alienates a massive chunk of its audience who don’t share those political views. Sponsoring documentaries and shows about Barack Obama or Hillary Clinton, for instance, are some of the examples that come to mind.

Which would be fine on its own if these political views weren’t also seeped into all of its other content (which is a problem with the entertainment industry in general, but the point stands). Netflix adaptations are notorious for being terrible. Shows like the Witcher or Cowboy Beebop- both based on established and beloved IPs, infuriate fans by arbitrarily changing the race and gender of popular characters in the name of diversity- despite the former being set in fantasy Poland and the latter in Space Japan.

Plus, Netflix keeps attempting to bring on board some really, really questionable content. Unlike a platform like YouTube, all the content on Netflix is moderated. Only content approved by Netflix can be added to their library. So when borderline pedophilic content like the film “Cuties” gets the green light, it really makes you wonder.

On a completely unrelated note, did you know that “Cuties” won a French film festival called “The Sundance Film Festival”? And that the guy who ran said Sundance Festival was arrested on diddling charges? Ain’t that a coincidence, huh?

The other, more legal but still weird, is a Korean drama set to release soon called “He’s Expecting.”

I have nothing further to say about that.

Refusal to Hold on to Good Things

In order to encourage more people to subscribe, Netflix began making its own original content exclusive to Netflix. A lot of the stuff was bad, and it seemed like Netflix was just throwing money at a wall and seeing what stuck.

However, there was a decent amount of the content that was genuinely good. Netflix subscribers would get hooked, and the show would grow over two to three seasons- then BAM. Canceled. To a layman, it makes no sense. Why would Netflix cancel their most popular shows?

The answer lies in cold, corporate logic. Netflix earns more money by getting people to subscribe, and people subscribe when they see more new content. So instead of funding successful projects, they just continuously produce more content because, in a round-about way, it’s actually more profitable.

The problem is that I doubt this is sustainable in the long term. People are going to clock out if they know that nothing they get invested in won’t ever get paid off.

The Explosion of Streaming Services

For a while, Netflix floated alone on a wave of money. The benefits were clear, and users loved it. Digital piracy dropped significantly with the advent of Netflix. Once everyone saw just how much money there was in streaming services, however, everyone wanted in.

Now every big studio wants to put their own stuff on their own service. Instead of getting everything for a couple of bucks a month, to watch the same quantity of content, you need to subscribe to Netflix, HBO+, Disney+, Amazon Prime, Apple TV, and, dear god, Hulu. Some of these services are not getting bundled together, mimicking the cable services they were supposed to replace.

So, at this point, who wants to pay more for less content? Piracy has skyrocketed once again, and subscriptions to these various services have plummeted.

Conclusion

Netflix was a flash of success that’s now being drowned out by competition. Yes, the numbers look good right now, but I bet you that that’s not going to last. The combination of factors I’ve mentioned is going to come to a head and cause the whole thing to collapse.

Bad management, weird content choices, corporate greed, and intense competition are going to begin seriously affecting Netflix’s bottom line. I haven’t even gotten to two of the latest pieces of news coming out of Netflix HQ:

  1. Netflix intends to crack down on password sharing.
  2. Netflix is going to be adding ads.

Both of these decisions are flabbergasting.

The first… I kinda get. Netflix wants all of its users to be paying instead of leeching off of one another to reduce the expenditure. Between friends, it’s one thing- but how will this affect a family living under one roof? In fact, the CEO directly called this “legitimate” in the past and even likely helped fuel Netflix’s growth overall.

Now, however, it’s a problem they’re “working super hard at [to prevent]”. The current idea is to have the option of adding additional accounts- for an additional cost. How this will be enforced has yet to be disclosed.

The second, however, is completely nonsensical. Netflix seems to intend to create a two tiered system: A lower-cost option with advertisements and a second “premium” tier without advertisements, similar to what other services like Hulu, Disney, and HBO have. They also triple-swear pinky promise that they won’t use trackers for personalized ads.

Both of these announcements have been made as a result of users leaving the service. In other words, Netflix’s solution to users walking away… is to make Netflix more expensive and more undesirable to use.

I think this is a sign of things coming to an end. Netflix’s stock is falling, users are walking away in droves, and Netflix’s higher-ups seem completely oblivious as to why. It’s almost comical how divorced from reality some of these decisions seem to be.

Which really frickin’ sucks because Netflix is a genuinely good service when all this other nonsense isn’t in the way. I think this is a problem of overengineering and attempting to fix something that ain’t broke – something that would otherwise work better if simply left alone.

Oh well. The way things are going, I guess I’ll be hoisting the black flag soon, ye scurvy dogs. There ain’t be no ads in Davy Jones’ locker, that’s fer sure.

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