Netflix, Not So Chill
The streaming company is dealing with lagging profits and slower-than-expected growth as its competition heats up.
It’s the original king of streaming television, it’s winning Emmy Awards, and it’s about to release its first feature film, but nevertheless, the bloom may be off the rose for Netflix: The company’s latest earnings reports reveal that its profits have plummeted by 50 percent compared to last year. Shares in the company are also dipping thanks to the news that the company is adding new subscribers at a depressed pace—a fact it blames on “involuntary churn” around the introduction of new chip-based credit cards, but which might have more to do with its increasing competition from Amazon and Hulu.
In terms of streaming networks, which seem to represent the future of home TV and film viewing, Netflix remains the most visible brand. Its original programming, which includes Orange Is the New Black, House of Cards, and Daredevil, has become crucial to maintaining its subscriber base, but is also very expensive to produce, while deals securing rights to first-run movies have also become more and more costly. The company still made $29.43 million in its last quarter (against a forecast of $31 million), but that figure is considerably less than the $59.29 million it made in the same period in 2014.
As a result, the company is raising its subscription fees (to $10 a month for its most-used streaming-only plan) while it continues to expand around the world, hoping to tap subscriber bases outside of America before its competitors can mount similar growth plans. Netflix’s advantage has always been in its huge back catalog of TV shows and films for subscribers to browse through. But Hulu recently poached films owned by the cable distributor Epix, and Amazon continues to try and ape the Netflix model by signing exclusive deals with critically acclaimed shows like The Americans and Mr. Robot, hoping to promote the kind of binge-watching that made Breaking Bad a cult sensation.
Netflix’s CEO, Reed Hastings, naturally states he’s untroubled by the news. “It is clear that Internet TV is becoming increasingly mainstream and traditional media companies are adjusting to the shift from linear to on-demand viewing,” he said in a statement. “It is a great time to be a creator of content because studios make content to sell content (not to withhold it) and there are new bidders for their product. Some studios will choose to license content to SVOD services like Hulu, Amazon Prime Instant Video, and Netflix. Others may not. We have a lot of content to select from.”
He’s not wrong. In this era of supposed “Peak TV,” there are more and more shows to go around, and for cord-cutters abandoning their cable subscriptions, signing up with Netflix and Hulu would still represent a huge slim-down in their monthly bills. Still, as streaming TV becomes the norm, competition will only get more furious, and Netflix may soon find itself wistful for the days when it was the only fish in a much smaller pond.