How it started: Netflix & Chill
How it ended: Netflix has chills
The crux of the problem for Netflix is the subscriber growth or lack of it.
In Q1 2022, they are going to add 2.5M new subscribers, as against 4M that they added in Q1 2021. International markets, especially India, is ‘frustrating’ Netflix’s CEO, Reed Hastings.
So what ails Netflix?
Netflix’s model works against it. It’s a hits-driven business. For a studio that produces its own content, producing hits at international scale is hard. For instance, in spite of price rationalization, India is a tough market to crack because local content depth is missing.
Platforms with user-generated-content, on the other hand, have a sturdier ramp to their subscription growth.
A few days back, Instagram said it was going to experiment with a subscription model where fans on Instagram influencers and content creators will pay a monthly fee to access subscriber-only content from creators they follow, like exclusive Lives and Stories.
There’s buzz that Tiktok might come up with its own subscription model too. Twitter has its own subscription service now (“which I don’t care much about and it’s below my line”, says the Twitterati).
If you look at the middle and long tail, subscriptions are continuing to do well. This segment is driven by the creator economy which, as we know by now, has been one of the biggest changes we’ve seen over the last decade when it comes to content monetization. As of 2021, we have around 50 million creators, and this number is expected to go up to 404 million by 2024. The pandemic-imposed restrictions have definitely helped, allowing millions of more people to turn creators of digital products/services and get paid for it—predominantly through subscriptions.
Substack, one of the pillars of the creator economy, said recently that it has cleared the one million paid subscriptions mark four times the amount it claimed to have in December 2020.
For the creator economy, subscriptions have proven to be a sustainable way to make ramen-money or a comfortable lifestyle. Or more. Several creators on OnlyFans say that they have been able to make millions through the platform. While we talk about subscription, we need to look at subscription creep (subscription fatigue in a new form).
The platforms themselves, unlike Netflix, serve as the infrastructure layer, leaving production to the users. If you study the underlying memetics, it isn’t surprising that school kids each have their YouTube channels and the genres of content you’d find on TikTok dwarfs the product categories you would find on Amazon.
Keeping attention by churning hits after hits across regions is hard at the scale of Netflix but smaller content creators are able to create content that appeals to their niche audience, and foster communities of fans and subscribers. The famed Netflix algorithm is good at predicting the success of a series, but the sourcing of content is still done the traditional studio-way. Here scale works against localization and that’s where other platforms win.
The brash declaration that sleep is the competition for Netflix is just that. Netflix’s real competition is the news this morning that led to a dozen meme videos from my favorite creator. Also, he gives it away for free or just a few dollars a month.
And while we’re talking so much about subscriptions, sign up for to read our newsletters every Sunday.
Check out what Leo Strupczewski, the Head of Marketing at Repeat had to say about rethinking the DTC subscription stack in our podcast, Merchantry.
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