Netflix Misfire Raises Doubts If Streamers Can Hit 1 Billion Subscribers

Have we seen the ceiling of high-end streaming?

Whether Netflix‘s slowing subscriber growth to the 222 million mark portends things to come for other big streamers is one of the biggest unknowns fueling volatility in media stocks. Hollywood has pinned its hopes for growth in recent years on attracting subscribers from the global market through streaming’s ability to transcend geographic boundaries.

Indeed, the mere suggestion that Netflix’s subscriber base could peak at around a quarter of a billion subscribers – after the company has invested more than $87 billion in content since 2013 – has contributed to the latest surge. of Wall Street sales in the media and technology sector. The emerging benchmark of 250 million is very different from lofty projections that large-scale services would steadily add customers from the growing pool of more than 1 billion broadband-equipped pay-TV homes around the world.

“The long-term total addressable market hasn’t changed…but with the weak economy, it looks like it will take longer to reach 1 billion subscribers. The pace may be slower,” says Rich Greenfield, partner and analyst at LightShed Partners. Variety.

Greenfield defended the ascendancy of the direct-to-consumer model as linear TV viewing steadily declined. Netflix seemed invincible just a few months ago, with “Squid Game” and “Bridgerton” raking in billions of views and “The Crown” winning the Emmy Awards, demonstrating a level of critical and commercial success that justified the expense fueled by the debt in issues of ever more market share.

Now it’s clear that the growing pains are coming.

“Investors have soured on direct-to-consumer streaming as losses mount, while Netflix’s dramatic downturn over the past six months has undermined the prospect of achieving the scale needed to generate solid profitability. “, said Greenfield.

New VIP+ analysis: How Disney can avoid Netflix missteps

Disney, meanwhile, confirmed its previous forecast that Disney+ would hit 230-260 million subscribers by September 2024. But even after posting strong subscriber gains for the first three months of the year, Disney also did not raise its long-term total subscriber goal.

In this environment, ambitious game plans for building direct-to-consumer platforms at Disney, Warner Bros. Discovery, Paramount and NBCUniversal could be hastily adjusted, particularly if the United States enters a recession, as widely predicted.

There is growing evidence that the high-end subscription streaming market in the United States is already saturated: more than 90% of Americans say there are “enough” or “too many” streaming services, according to a recent Boston Consulting Group survey. US households report having an average of 3.7 VOD services per subscription, up from 3.1 in 2021 – almost all from new entrants like HBO Max, Apple TV+, Peacock, Paramount+ and Discovery+, according to the BCG survey.

A particularly concerning metric for Netflix: Cancellations among long-term subscribers (who have paid for the service for more than three years) accelerated to 13% in the first quarter from 10% the year before, according to the research firm and analysis Antenna. , based on its panel of 5 million US streaming users.

Despite Netflix’s woes, concerns about streamers falling off a cliff have been overblown, analysts say.

“I think it’s a speed bump – it’s definitely not the end of the trail for streamers,” says Colin Dixon, chief analyst and founder of nScreenMedia. “Netflix was the first mover in the market, so that day was coming for them.”

Brendan Brady, Antenna’s principal analyst for media and entertainment, said consumer behavior over the remainder of this year will be crucial for subscription services. The signals sent by the market fluctuations of recent months are not encouraging in the short term.

“We’re heading into a recession,” says Brady. “We’ll see consumers cut back on discretionary spending, which doesn’t bode well for SVOD services.”

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