Netflix rode the wave of the coronavirus pandemic lockdowns to massive profits in 2020 but the value it created is rapidly eroding.
From the reopening of factories and international flights to rising global energy demand and the return of cinemas; there are signs of sustainable global economic recovery. The discovery of a vaccine for covid-19 has also increased optimism.
Nevertheless, last year was a bumper harvest for the 26 years old video-streaming service company that offers TV shows and films, as well as original content, to 183 million members globally.
Covid-19 induced lockdowns had people stuck at home. They could not go out for movies or concerts, so entertainment had to come home, hence, Netflix.
The American company was on a row last year, adding 15.80 million new customers in the first quarter of 2020. This momentum continued throughout the year.
However, 2021 is a new challenge. Most of the world is emerging from the pandemic.
Cinema halls are re-opening. So the world does not need a Netflix subscription to keep busy and the numbers show this.
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Netflix added 3.98 million customers in the first quarter (Q1) of 2021 and as this might sound impressive it eluded their expectations or forecast by a long shot.
The company’s original target for the first quarter was 6 million customers, so they fell short by more than 30 percent. When a company underperforms their shares plummet.
Netflix plunged 13 percent last quarter and as a result of that their investors lost a lot of money and the future does not look any better.
In an attempt to salvage the situation, Netflix is reportedly working on a feature that will prevent people from sharing their passwords with those outside their households.
Some users have already started receiving the pop-up message and it reads “If you don’t live with the owner of this account, you need your own account to keep watching.”
In order to continue, they need to verify the account with an E-mail or Text Code or create a new account with a 30-day free trial.
However, these efforts just keep digging their proverbial ‘grave’ deeper as a lot of people have taken to Twitter to share their displeasure about this new update.
Until now, Netflix has not done anything to police these terms. Netflix’s Basic plan costs $8.99 per month and allows streaming on a single device, while the Standard plan costs $13.99 and allows streaming on up to 2 devices, and the Premium plan costs $17.99 and allows on up to 4 devices.
However, they don’t limit users on the number of devices a single account can be logged into. A Netflix spokesperson said in a statement that “This test is designed to help ensure that people using Netflix accounts are authorised to do so”.
Netflix has also launched a new feature called “Fast Laughs” that will allow users to watch, react and share short clips as well as add the show or movie to a Netflix watch list.
Alternatively, one could also simply tap the “Play” button to start watching the show immediately. Similar to TikTok or Instagram’s Reel, Fast Laughs features full-screen videos that one could swipe through vertically, and places the engagement buttons on the right side of the screen.
These buttons let you react to the clip with a “LOL” (crying/laughing) emoji or share it via iMessage or other social media apps, like WhatsApp, Instagram, Snapchat, or Twitter.
The only difference is that there is no comment button yet. Users can access the feed through the bottom navigation menu by clicking on the Fast Laughs tab. The clips will start playing automatically when one ends another begins.
The feature also includes a full-screen feed of funny clips from Netflix’s big comedy catalog including films like “Murder Mystery”, series like “Big Mouth’’, sitcoms like the ‘Crew’’ and stand-up from comedians like Kevin Hart and Ali Wong.
Fast laugh is currently available for iPhone users in select countries, and Netflix will be testing on Android soon.
Despite these minor set-backs, the company is however expecting just 1 million new users in the next quarter, but analysts are expecting more than 4 million.
So we could be looking at another quarter of underperformance. But, what exactly happened to Netflix? Where did things go wrong?
Netflix discovered (the hard way) that the pandemic is a double-edged sword. During lock-downs, they made money; however, now that the lock-downs are over they are losing money.
Businesses that bank on disruptions rarely survive those events and Netflix is a prime example.
The market has also changed a lot since 2020; video streaming is no longer a monopoly, there are new players and they are coming up with bold new ideas.
You probably know what I’m talking about, the likes of HBO max or Disney plus, their shows are quite different from Netflix and thus the audience is split.
Disney plus has racked up 100 million subscribers while Netflix stands at 207 million subscribers.
Netflix’s come back strategy
So is it time to write them off? Well not yet. Every time Netflix faces a crisis, they have one ‘Go-To’ strategy, ‘produce more content’, because ultimately, that’s what the business is about. Good Content.
Netflix plans to spend $17 billion on new shows in 2021. Last year, they spent $12.5 billion. Most of these new shows target the global audience; because America is a saturated market, but in Europe, Asia and Africa there is still scope. So, regional content is the mantra for Netflix in 2021.
However, this is not a guarantee for success, because messing up regional content can be a one-way ticket out of the market. So this is essentially a gamble for Netflix and a big one at that.
Nonetheless here’s the kicker; will companies that profited from the pandemic, extend their dream run? I can think of a few; ZOOM video calling, food delivery apps, even liquor companies; there was a massive demand for these services in 2020.
Remember, 2020 was an aberration, not the norm. So, ‘as and when’ we emerge from this pandemic, fortunes would reverse.
When employees return to work, ZOOM would feel the pinch, when the curfews are fully lifted, delivery apps would suffer; most of our consumption patterns would return to normal (even if it is a ‘new normal’), this would be a new challenge for these pandemic success stories.
So what is the take-away here? A sustainable business model is based on flexibility. It may thrive on disruptions but it should also survive once the disruption fizzles out. Country or company, far-sightedness is the key to beating this pandemic.
Edited by Stephen Onyekwelu
