A scene from Netflix’s “Stranger Things”.
Can Netflix ditch its party release model? Strange things have happened.
The one-time release strategy for television shows is the foundation of Netflix’s strategy. The first seven episodes of “Stranger Things,” which all premiered on May 27, broke records. It is the biggest-ever premiere weekend for an English-language TV show on the service with nearly 287 million hours watched.
Despite the success of its marquee series, Netflix struggled to kickstart subscriber growth. So its party strategy is facing new scrutiny as the company looks for ways to better retain its customer base.
“With Netflix, or anyone else, never say never,” said Peter Csathy, founder and chairman of advisory firm Creatv Media. “As they say ‘no way, no ads’, don’t assume that binge-watching is forever.” He added: “Binge viewing is on the table.”
Investors question Netflix’s ability to cope with subscriber losses and increasing competition in the streaming space. The streamer’s stock has plummeted over the past year from $700 per share to around $160. The company reported a loss of 200,000 global customers during its first-quarter earnings report in April. It also warned of deepening problems in the future, forecasting the loss of about 2 million global paying subscribers during the second quarter.
Now, Netflix is reconsidering some of the core principles that once made it the nascent king of the streaming world. Co-CEO Reed Hastings said the company was exploring lower pricing, ad-supported levels in a bid to bring in new customers after years of rejecting ads on the platform.
Those familiar with the streaming space suggest more changes could occur, including a stronger focus on franchise content and even changes to staggered new episodic content releases.
Netflix has toyed with different release models, largely due to production delays related to the pandemic, and noted that splitting a season into two parts can be a “satisfying long party experience” for subscribers. However, the company has given no indication that they will move away from releasing all episodes of the script series at once. Instead, decisions will be made on a case-by-case basis.
Netflix declined to comment.
“When Netflix started, it really had a field of its own,” said Robert Thompson, a professor at Syracuse University and an expert on pop culture. “One of the reasons they started buzzing was to get people talking and actually launch their new original program. They did it. But now the case is very different.”
Netflix no longer has licensed content like “The Office” or “Friends,” which keeps subscribers coming back month after month for repeat viewing. Instead, it has several high-profile shows, such as “Stranger Things,” “Bridgerton” and “The Witcher” — as well as an extensive library of series that have not yet achieved the same level of prestige or popularity.
Thompson notes that all shows released on the streaming service end up being bingeable. That’s how they were first introduced to a platform-controlled audience.
For party or not party
“Releasing at once, the Netflix model, increases the value of the party,” said Nick Cicero, vice president of strategy at data analytics firm Conviva. “This allows customers to consume at their own pace, but relies on an in-depth catalog.”
“The flip side,” he says, “is the week after week, which is designed to bring people back and give them something to look forward to. It’s a very different marketing model.”
On services like Disney+, HBO Max and Hulu, individual episode releases keep viewers hooked for weeks, meaning less churn each month. Meanwhile, Netflix subscribers can watch a full season of the show they’re interested in and then leave the service at the end of the month.
This photo illustration shows the Netflix logo displayed on a smartphone screen, with a graphic representation of the stock market in the background.
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Sequencing content throughout the year allows services like Disney to entice customers to stay on a monthly basis, but it also entices them to pay for an annual subscription upfront. The company’s Disney+ platform uses two of its biggest franchises — Star Wars and Marvel — to keep customers coming back for more.
The company is releasing “The Book of Boba Fett,” which runs from late December 2021 to early February. Then added “Moon Knight” in late March, which lasted until early May. Then at the end of May, he released “Obi-Wan Kenobi,” which will continue until the end of June. “Ms. Marvel” arrives early June and will run through the end of July. August had the release of “She-Hulk,” which brought episodes through October, and then “Andor,” which would finish its first season in November.
Then in December, Disney+ will release the “Guardians of the Galaxy” Christmas special. In this surprising release, the company can entice Star Wars fans and Marvel fans to stay with the service long term.
“With Netflix, it’s very easy to join for three to six months and then leave for three to six months,” said Michael Pachter, analyst at Wedbush. “After ‘Stranger Things’ is over and ‘Ozark’ is over, what now?”
In recent years, Netflix has been experimenting with weekly releases for a few reality shows, but haven’t tried this strategy with a scripted series yet.
“We fundamentally believe that we want to give our members choices in how they see,” Peter Friedlander, Netflix’s head of scripted series for the US and Canada, said. early this month. “So giving them the option of this scripted series to watch as much as they want to watch when they watch it, is still the basis of what we want to give.”
Netflix, however, has dabbled in splitting seasons in half or in parts to spread them out. The fourth and final season of “Ozark” was segmented into two, and so was the latest season of “Stranger Things.” The final two episodes of “Stranger Things” season four, including a 2.5-hour finale episode, will begin airing on July 1.
“Splitting the seasons actually had a practical reason beforehand, which was the Covid delay and all that kind of project that led us to split seasons,” co-CEO Ted Sarandos said during the company’s first-quarter earnings call in April. “But what we found is that fans love both.”
“So being able to share it gives them a very satisfying party experience for people who want a really satisfying long party experience,” he said. “And then being able to deliver a follow-up season in a few months versus, in some cases, a new season of ‘Stranger Things’ coming almost three years after the last one or so.”
Netflix has long maintained an all-in-one model because of its subscribers, who it says want more control over when and how they watch content. Shows like “Maid,” “Inventing Anna,” “The Lincoln Lawyer” and “Squid Game” have all held the top 10 spots on the streaming service for weeks, suggesting that Netflix shows could have a long life to watch on the service as it travels from word of mouth to a new audience.
However, Netflix could learn a lot from the releases of “Ozark” and “Stranger Things” to determine if any other scripted series would benefit from this strategy.
Pachter suggested that Netflix could take a cue from Amazon and release three episodes a week.
“It’s okay to say, ‘We’re bullies, but there are things our competitors do that we admire and we respect them and we think they’re doing right,'” Pachter said. “This is not the cop out.”
Netflix’s single-release strategy might set it apart from other streaming services, but it also meant that it had to increase its content output to fill the gap between series. Instead of having, say, 30 shows spread across the year, it takes 300, says Pachter.
“Netflix’s data dump means they have to create more content to minimize churn,” he said. “I think they will be much more successful if they focus more on quality than quantity.”
For years, the streaming service used licensing agreements with networks and studios to supplement its library of long-running and popular series such as “Parks and Recreation,” “Schitt’s Creek,” “Mad Men,” and a string of Marvel-based superhero shows. .
Those contracts have expired and the show is now on other streams. In another blow, Netflix will lose 12 seasons of CBS’ “Criminal Minds” by the end of the month. “New Girl,” another staple in the Netflix collection, is expected to leave the platform in 2023.
“Breaking Bad,” “Grey’s Anatomy,” “NCIS” and “Supernatural” hold out for now.
Series like this, spanning a number of seasons or dozens of episodes, have been a major driver of view traffic on streaming services for years. Now, Netflix relies more on its own original content, relies heavily on content creator offerings and surprise hits like “Game Squid” and “Love is Blind.”
“Netflix has a lot of content, but this iconic evergreen content hasn’t kept up with the catalog of other streaming services out there,” said Cicero.
Relatively new streamers like Disney and NBCUniversal’s Peacock have decades of legacy content to fill their libraries. That’s why Netflix made a deal to be the first streaming space for Sony’s new releases in 2021.
It’s also why Creatv’s Csathy believes that Netflix should focus on developing franchises or buying rights to established franchises.
“Instead of throwing all the titles up against the wall to see what the consumer sticks with, focus on franchises and brand names,” says Csathy. “The smartest bets are those with built-in name and audience recognition.”
“Wall Street will reward those who come out with a public, less is more strategy,” he added.
However, there are those who don’t think Netflix would be so quick to overhaul its established strategy.
“I think people tend to forget in our industry that it’s not a one-size-fits-all,” said Dan Rayburn, a media and streaming analyst. “I don’t think Netflix will say no more binge watching.”
Instead, Rayburn expects streaming to continue to try new models, such as its plans to add an ad-supported package to its platform.
He noted that the sharp stock reaction was a result of Netflix getting all of its revenue from streaming. This means that when an event does not go well or the service sees a slowdown in customer growth, there is an immediate reaction.
Ultimately, streaming analysts say content spending isn’t going down, even with ongoing economic stresses, such as higher inflation and interest rates, and a potential recession on the horizon. Competition in the streaming space will continue to drive these companies to create and distribute more content.
“Where the dollar is going to be reallocated is the question,” Csathy said. “For Netflix, I think ‘less is more’ is a strategy that pays off for them.”
Disclosure: Comcast is the parent company of NBCUniversal and CNBC.