So no, the company’s not doomed today or destined for collapse tomorrow. Instead, I think what’s interesting to consider is that Netflix has almost certainly peaked. As a cultural force, as a business success story, and as an entertainment death star destined to swallow Hollywood whole, the arrows are all pointing the wrong direction.
Here was Lucas Shaw at Bloomberg two weeks ago, writing about one of several problems the company has encountered over the past 12 months:
Netflix is struggling to get viewers to stick with its shows for more than a season.That report went viral, prompting a week of commentary on Netflix’s binge model and elongated release schedules, with lots of Twitter users observing that viewers consume eight episodes across a few days and then often have to wait as long as two or three years for the next season. By that point, memories of plot or characters are faint at best. The emotional connection to the story doesn’t exist. No one should be surprised that the audience for a show like One Piece is cut in half in 2026, three years after the first season aired.
One Piece, one of Netflix’s most-watched shows of 2023, lost more than 30% of its audience for the second season. Season two of Beef suffered a drop of more than 70%. The Night Agent shed 50% of its audience for the second season and another 35% for its third season. These figures are all through the first four weeks of a show’s release and come straight from Netflix.
Adding insult to injury, the latest season of Avatar: The Last Airbender, one of Netflix’s most-watched titles in 2024, suffered a drop of more than 60% over week one. That doesn’t bode well for the rest of the month.
While that explanation certainly feels true, Shaw followed up this week to note that data is mixed as to whether extended breaks between seasons do in fact correlate to audience drop-off. Severance, on Apple, gained a ton of new audience after its nearly three-year break. Stranger Things and Bridgerton have been multi-season powerhouses at Netflix despite their long breaks between seasons. Conversely, Tina Fey’s Four Seasons debuted on Netflix in May last year, was met with pretty good reviews, and returned 13 months later with half its audience.
I think the Netflix problem is more fundamental than production schedules. What if these shows just aren’t very good or differentiated? Consider the original productions Netflix has surfaced in the past few months:
- A Good Girl’s Guide to Murder
- Running Point
- Lord of the Flies
- Something Very Bad Is Going to Happen
- Unchosen
- XO, Kitty
- Big Mistakes
- Beef
- Man on Fire
- Little House on the Prairie
- His & Hers
- Nemesis
- The Boroughs
Content and the Year of Discontent
I mentioned the anxiety surrounding Netflix these days, so let me take a step back here. Amazingly, it’s only been eight months since Netflix won the bidding war to buy Warner Bros. Discovery and looked poised to become an entire generation’s one-stop shop for high-end entertainment. The implications of that news produced lots of anxiety, including one of my first articles on this website—Netflix and the Flattening of Everything—and a memorably ominous Variety cover that captured Hollywood’s mood at the time:
The Warner Brothers deal was abandoned at the end of February, when Netflix walked away from the table in the face of regulatory pressure from Washington and an increased bid from Paramount. Even so, the market hated the initial play, as investors wondered en masse why the world’s most (only?) successful streaming platform was suddenly ready to take on a mountain of new debt to acquire a company that had already been the subject of several expensive, failed acquisitions over the past 25 years.
Now, even as the deal is off, the questions remain. Are we sure a Netflix world takeover is a forgone conclusion? Is Netflix sure? The stock is down 18% this year and over 40% across the past 12 months. Investors who did a double take last December seem to have noticed that YouTube has twice the overall engagement that Netflix does, and more time watched on televisions, while free, ad-supported TV services like Tubi and the Roku Channel are becoming meaningful engagement competitors themselves.
Meanwhile, alongside all the original programming that’s failed to launch (or re-launch?), Netflix is adding videos from BuzzFeed, Condé Nast, Hearst and Penske Media (as Shaw notes: “Get ready for lots of Bon Appétit cooking videos on Netflix.”) Last fall the platform also added a variety of high-end podcasts in a bid for relatively cheap, recurring content that may be seeing underwhelming results. Then again, they continue to buy more, so who knows? Elsewhere, the Wall Street Journal reports that Netflix executives have “recently discussed adding live channels that would continuously stream certain programs, or shows and films from a certain genre.” Can Netflix become HBO before HBO becomes Netflix? Can Netflix become Tubi before Tubi destroys Netflix’s long-term pricing power?
All of those moves might have once been seen as the savvy power plays of a world-conquering behemoth intent on taking the next step to expand its footprint. Today, in the shadow of a Warner Brothers bid that accidentally punctured the company’s air of inevitability, this year’s moves look more like spaghetti being thrown at a wall by a company that’s searching for something—anything!—that might hold people’s attention and scale more effectively than an expensive library of content that’s consumed, discarded, and then effectively worthless.
Looking back at the deal to acquire Warner Brothers, HBO and all that IP, I think it’s clear Ben Thompson was right when he wrote that concerns over competition from YouTube specifically and the internet generally were likely key drivers of Netflix’s decision-making. Those concerns seem to be animating all the other options the company is considering, and understandably so. The same way that the rise of social media has throttled the growth of the gaming market, it stands to reason it could do the same to demand for scripted content. With respect to the specific Netflix logic for buying WBD, that context is important: the biggest companies, with the deepest, most diverse libraries, will have the best chance at defending themselves in this new environment. [...]
I like to leave all Aggregator analysis to Ben, but I don’t think investors are crazy to have some questions about where this leads and what the upside looks like. For all the advantages its massive customer base affords (leverage over costs, advertising upside), an obvious difference between Netflix and businesses like Meta, YouTube, or Google—the other demand aggregators—is that Netflix has to spend far more money to deliver on its value proposition to customers and has fewer network effects to defend its long-term centrality to people’s lives.
by Ben Thompson and Andrew Sharp, Sharp Text | Read more:
Images: Al Bello/Getty Images for Netflix; Variety
