25 years of Netflix: The streaming service is weakening

Recently, Netflix has been losing customers, while rivals like Disney have been making strong gains. On its 25th birthday at the end of August, the streaming market leader is under pressure as rarely before. That's why Netflix is focusing on new strategies and breaking with its traditions. For many users, this could soon have unpleasant consequences.

In the coming year, Netflix plans to start taking stricter action against customers who share their login data with others. The company assumes that more than 100 million households are using the streaming service without authorization in addition to the nearly 221 million regular subscribers. Up to now, Netflix has taken a relaxed approach here, but this is now to come to an end.

But can freeloaders be turned into paying customers so easily? "Netflix has to proceed carefully so as not to scare users away," says expert Simon Baker of the money house Société Générale. U.S. surveys indicated a relatively high propensity to churn.

Competition becomes larger

After the streaming boom at the beginning of the pandemic caused a rush of subscribers, Netflix lost more than one million customers in the first half of 2022. Particularly in the increasingly oversaturated home market of North America, where there are numerous competing offerings, many users opted out. After years as a stock market darling, Netflix is now also having a hard time on Wall Street: The share has fallen by almost 60 percent this year - significantly more than the overall market.

And now, of all times, the competition is gaining momentum. Rival Disney+, which started as a Netflix hunter less than three years ago, gained around 14.4 million subscriptions in the three months to the end of June - not least thanks to the Star Wars series "Obi-Wan Kenobi" - and now already has a good 152 million user accounts. If you add Disney's other streaming services Hulu and ESPN+, the Hollywood giant has already more or less caught up with Netflix. (Werbewoche.ch reported).

However, Disney also helped out a lot with discounts and special offers in the past few years. In addition, the figures are only comparable to a limited extent, since Disney lures many users with combination deals. Whether the Mickey Mouse Group can maintain its strong growth also remains to be seen. Nevertheless, Netflix looks weakened at the moment.

Netflix version with advertising

To get back on track, founder Reed Hastings even gave in on one of his biggest taboos. In view of the poor development of user numbers, Netflix is launching a cheaper version of its streaming service with advertising clips. Actually, Hastings had always resolutely rejected this. The advertising version is to be launched in 2023, initially in "a handful of markets.

Will it bring the hoped-for momentum? "Subscription growth should initially benefit from the cheaper version with advertising," says a Barclays study. However, there is a risk that many old customers will switch to the cheaper new offer.

Netflix has already said goodbye to another trademark. For example, the online video service no longer released all episodes of the latest seasons of "Stranger Things" and "Ozark" at once as usual. Netflix is thus abandoning its tradition of providing the material for marathon binge-watching of new series.

The reform is designed to keep customers interested for longer - series fans can no longer watch everything in one go and then cancel their subscription. While it is customary in the traditional TV industry to publish only one episode a week, Netflix is breaking its long-standing standards.

Founded as a DVD rental

After all, the company has a lot of experience in adapting its business models - and has had a lot of success in the past. After all, Netflix was originally a DVD rental company. Legend has it that the company's history began with a rental video.

Founder Hastings misplaced a cassette of the movie "Apollo 13" - annoyingly, the video store accumulated $40 in fees because of it, he later recounted. On his way to the gym, Hastings saw the light: For $40 a month, you could work out there as much as you wanted. This was the idea behind Netflix's subscription model: for a monthly fee, you could have as many DVDs as you could manage in a month sent to you by mail.

But unlike the video store giant Blockbuster, for example - which rejected the takeover of Netflix in 2000 at the now seemingly ridiculously low price of $50 million - Hastings recognized the signs of the times. DVDs haven't played a role for Netflix for years; since 2007, it's been all about streaming. While Blockbuster filed for bankruptcy in 2010, Netflix, as a pioneer of online video services, became the big shocker for cable TV.

In the meantime, however, the empire is fighting back - not only Disney, but also the major US media groups Comcast, Paramount and Warner Bros. Discovery are fully committed to streaming. Tech giants Amazon, Apple and Google are also upgrading their services - and Netflix is finding it increasingly difficult. (SDA)