Netflix's decline is a warning to all streaming services

The Netflix series 'Squid Game' has been exceedingly popular. Reuters

The much-publicised stumble by Netflix this month may have shed new light on the limits of the subscription economy. If the company’s current problems turn out to be a broader indicator of slowing growth in the streaming sector, that stumble may become a heavy fall. The markets believe it does, at least for now, and the company’s share price has fallen sharply in recent days.

The trigger for this stumble was Netflix reporting that it lost 200,000 subscribers in the first quarter of this year. The company had previously said it expected to add more than two million viewers during that period, although even after that net loss is taken into account, the streaming giant has more than 220 million subscribers worldwide. However, more cancellations are expected in the second quarter. The markets and analysts were unimpressed. Netflix’s share price, which was trading above $500 a year ago, had fallen below 190 before markets opened on Thursday.

Those depressed numbers have spawned plenty of expert analysis on fixing the problem.

Many say that the Netflix catalogue is not interesting enough, despite some standout series in recent history, such as Squid Game, Stranger Things, The Queen's Gambit and more. Impressively, Netflix has produced seven movies nominated for best picture at the Academy Awards since 2019, although it has yet to bag the top prize, losing out to rival AppleTV+ and Coda this year.

Without doubt, developing more compelling content and winning awards will do no harm to growth prospects, although how much good it actually does is also questionable. The commercial model of streaming services is based on customers paying for what they don’t watch, rather than what they do. Netflix claims to have millions of hours of content available at any given time.

The bigger problem Netflix has is that there is now so much competition and the features that once seemed like virtues, such as the ability to binge watch all weekend, have now been widely copied.

No one can deny that Netflix changed the rules, opening up a world of possibility to subscribers and allowing us to gorge on its content. But as each new entrant has entered this space, those advantages have been blunted.

Disney+ launches this year in the Middle East, at an introductory offer of less than Dh30 per month, and claims to have close to 200 million subscribers worldwide. An already crowded local marketplace is about to get even busier. Disney’s play for customers in the region is a mixture of brand recognition and heritage, back catalogue and an attractive price point. How many of those suggested virtues does Netflix have?

Competitors, such as AppleTV+ and Amazon Prime, offer added benefits to subscribers, which may persuade customers to stick with them even if the programming is not perceived to be as comprehensive as competitors.

This image released by Amazon Prime Video shows Josh Brolin in a scene from 'Outer Range'. AP Photo

Still other platforms have used sport as a way to reach new subscribers.

StarzPlay has been building its portfolio of live sport, including high-profile cricket, rugby and golf events. MBC’s streaming offshoot Shahid now offers comprehensive Formula 1 coverage every race weekend.

That’s good for fans, although the irony for Netflix is that it, more than any other entity, has helped F1 grow its global audience through its compelling Drive to Survive series, particularly in the notoriously tough to crack US market. The dramatic finale to the Etihad Airways Abu Dhabi Grand Prix and the drivers’ championship last year even managed to serve up a jaw-dropping season-ending episode that Netflix would truly be proud of.

That said, even the live sport model is a potentially difficult one for Netflix.

For a company that forged its reputation on innovation and difference, if it became a home to live sport and if it started to accept advertising in a bid to attract subscriptions at a lower cost, as its chief executive Reed Hastings suggested this month, then the Netflix proposition starts to look a lot like the cable and satellite model that it took on and beat some years ago.

The subscription economy may soon find itself in a tough place and those first-quarter Netflix results may yet be seen as a bellwether for a broader reckoning.

Many customers are now signed up to multiple platforms as content rights get sliced and diced.

Every month the text messages announcing another subscription charge being drained from your bank account arrive as a reminder to interrogate whether you have extracted value from that subscription or not.

Anecdotally, many customers are less price sensitive about signing up for entertainment subscriptions and sticking with them than they are about, say, paying to access news sites. But that may change this year. As programming switches from one platform to another, so may streaming customers.

Most subscription charges have traditionally been priced competitively, but with the cost of living rising in many parts of the world, a great cancellation or, at the very least, a rationalising of expenditure by customers may soon happen.

If it does, expect multiple-subscription households to lose at least one of the services they’re signed up for. And if that plays out, then in a landscape where a lot of these streaming services now look similar, the original disruptor Netflix may find itself squeezed out of the conversation for the first time.