It may
not yet be noticeable when we flop on the sofa and flip on
Netflix, but the
golden age of streaming entertainment might be over. We probably will not like
what happens next.
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Soon we might be
paying more for fewer good options, feeling wistful about the olden days of
limitless streaming binges, and sitting through irksome commercials.
A short
explanation for this vibe shift: There has been a little loss of faith in the
growth potential of streaming, and doubt has profound ripple effects.
This started with
Netflix and its surprising disclosure earlier this year that it lost
subscribers for the first time in a decade. On Tuesday, Netflix said it had
shrunk again, although not as much as it had forecast. Netflix’s co-chief
executive,
Reed Hastings, described the company’s business results as “less
bad”.
When the streaming
leader started to stumble, it set off a mass questioning about streaming
services in general.
Investors in
entertainment companies and corporate bosses started to take seriously questions
like: Is streaming a worse business than cable TV? What if we overestimated how
many people would pay for streaming or misjudged how quickly they would change
their habits?
Streaming remains
the future of entertainment, but, the future does not necessarily arrive in a
straight line.
One investment
analyst told my colleague Nicole Sperling that he believed the total potential
market for Netflix might be 400 million customers worldwide, rather than one
billion, which Netflix had long said it was reaching for. If Netflix’s
potential is less grand than the company imagined it would be, or if it takes
longer to get there, that’s not only a problem for Netflix. It also shows that
streaming may never be as big as optimists believed.
We do not always
need to care when a rich company freaks out that it is not growing as big and
fast as it wanted. But this is different: We have benefited from the heedless
streaming optimism, and the potential mismatch of entertainment companies’
expectations and reality will affect us.
In the past
decade, companies including Netflix,
Disney, HBO, Comcast, Apple, and Amazon
have been throwing money around, mostly without turning a profit, to grab
customers for their streaming services. All that money has most likely brought
us cheaper and better streaming video services than those we would have had if
there weren’t so much hope that these entertainment services had a huge and
lucrative potential audience.
If we had fun when
hope about streaming was high, it might be a bummer now that the industry is
questioning its own optimism.
Netflix and other
companies say that they are still confident, but they’re not acting like it.
Netflix said on Tuesday that after spending gobs and then more gobs of money on
making or buying entertainment for a long time, it would keep its programming
budget roughly the same for the next few years.
Prudence with
money at Netflix is a new look, and Netflix is not alone. Reporters have been
busy chronicling budget cuts around the streaming industry and cancellations of
shows to save money. “The days of the drunken-sailor spending are gone,” one
entertainment agent recently told Lucas Shaw, a Bloomberg News reporter.
(In fairness,
there is still drunken-sailor spending, particularly from companies like
Apple,
which have goals for their streaming services other than turning a profit.)
All of us will
start seeing the effects of this austere-ish streaming phase soon, if we have
not already. If you have wondered why Netflix and some other streaming services
are releasing episodes of series one at a time or in batches rather than all at
once for our bingeing pleasure, that is partly a result of growth concerns.
Netflix wants you to subscribe for months to watch the new season of “Stranger
Things” instead of watching all new episodes in a weekend and then canceling.
Companies worried
about their growth may release less “wow” programming or charge higher prices
than we are used to. Netflix is beginning to push “paid sharing” subscriptions,
a euphemism for charging extra to those people who now share a single Netflix
password with six cousins and the pizza delivery guy. When Netflix was
confident about its growth, it mostly ignored account sharing. Not anymore.
Lower-cost
streaming subscriptions with commercials have been popular for Hulu and HBO
Max, and Netflix will try them, too. They are an option for us to pay less, but
they’re also an acknowledgment that the relatively low-cost, all-you-can-watch
buffet of entertainment with no ads is most likely behind us.
It is possible that this
sadder phase for streaming is a blip. We will see. But it is startling to see
how much has already changed since streaming companies that assumed they would
keep growing fast for a long time had to confront the possibility that they
were wrong.
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