2024-01-08 01:28:00
Streaming media companies are frantically “cutting costs”, and even Netflix (NFLX.US), which is “content is king”, has cut more than 100 series
The past 18 months have been marked by reports of significant layoffs at major media companies: Disney (DIS) laid off thousands of employees and slashed billions of dollars in budgets. Warner Bros. Discovery Channel (WBD) is also cutting staff, albeit on a smaller scale. In many ways, this layoff started at Netflix (NFLX), which lost customers in the first half of 2022. But while media companies talk regarding how much programming they will cut, Netflix is not. Netflix has cut some staff and halted budget growth, but it hasn’t engaged in a true purge. But now, even the indestructible Netflix is starting to get embarrassed.
Netflix cuts more than 100 series
With two strikes across the U.S. halting production, Netflix has done something unprecedented: reduced the release of its series. Data from What’s On Netflix, a website that covers the streaming giant, shows that the company will release regarding 130 fewer original shows in 2023 than the previous year, a 16% drop.
The company has increased the number of new original shows over the past decade, but output fell every quarter last year. This is true in every major programming category. Netflix is releasing fewer movies, TV shows, documentaries and stand-up comedy specials. In the last three months of 2023, Netflix released its weakest new series in five years.
There is an obvious reason for this decline. Although the company said that the strike by writers and actors did not have a big impact on its schedule, the decline in production in the second half of this year was larger than that in the first half. Data from What’s On Netflix shows that Netflix released regarding 60 fewer TV series in the second half of this year, a drop of regarding 25%.
The fallout from the strike will continue to impact Netflix’s release plans for at least a few more years. Streaming services have completed production on many TV series scheduled for release in 2023, but they are just beginning production on many series scheduled for release in 2024 and 2025. Many of these projects were postponed (or canceled).
This is true throughout Hollywood. The 2024 movie slate looks a bit sparse, as some blockbusters have been pushed back to 2025. But this isn’t just a temporary decline, either. Netflix plans to produce fewer shows in the future. Film director Scott Stuber outlines strategy for making fewer (but hopefully better) projects. While the strike may have reduced production of new scripted programming, the streaming service also released fewer new documentaries and stand-up specials — two genres that were largely unaffected by the strike.
We’ve seen this happen in comedies. Netflix flooded the market with comedy specials, became the birthplace of stand-up comedy, and then scaled back its production. It remains the largest funder of stand-up specials, but its funding isn’t as large as it was in 2017 and 2018.
Over the past decade, Netflix has expanded its production of original movies and TV shows at an unprecedented pace in an effort to capture as much of the market as possible. It has grown from a few original works released in 2013 to dozens, even hundreds. It also wants to make up for the loss of licensed games from other studios. Netflix is now the world’s leading television network, and other studios have resumed licensing the company.
The good news is that the production decline hasn’t affected Netflix’s business. The company added more than 16 million customers in the nine months of 2023 and said it would add millions more in the final quarter. Users are canceling service at a much lower rate than other peers. Netflix’s output remains so high that it’s unclear whether customers will notice the reduction in programming. After all, Netflix still produces more scripted shows than any other company. However, writers and producers will notice changes in job losses.
Management has concluded that it can maintain current spending and reduce production while still increasing sales, at least for now. Netflix has benefited from cracking down on password sharing and introducing cheaper ad-supported tiers.
Weak competitors
It helps that Netflix’s rival media companies are in a weaker position. The cable networks of Disney, Paramount Universal (PARA), Warner Bros. Discovery Channel and NBCUniversal are losing viewers every day, while their relatively smaller streaming services face higher churn. Pressure from shareholders forced them to cut programming spending and cancel many shows, including projects in development (for example, Amazon canceled the planned series Magnificent Seven).
But spending cuts alone are not enough. They also needed new revenue streams, which prompted them to return to Netflix. Warner Bros. has sold several hit series to Netflix, including the most popular streaming show in the U.S. in December: “The Big Bang Theory” spinoff “Young Sheldon.”
Netflix will begin streaming the show on November 24. Ratings soared during its first week on Netflix, then doubled the following week. Netflix has accomplished this feat time and time once more, with shows like Suits (Universal), Six Feet Under (HBO), The Pacific (HBO) and Suicide Squad (Sony/CBS), among others Episodes from other companies. Netflix first used shows from other companies to attract viewers, and now it’s using them once more to please viewers.
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