Netflix boss Reed Hastings says traditional television will die in “five, 10 years.”
The co-founder and executive co-director of the streaming giant made the prediction in Tuesday’s investor call when the company reported its second-quarter gains, which shocked markets by showing a loss of one million subscribers, significantly less than the 2.4 million Netflix had. he projected that he would lose.
Asked why he had driven better-than-expected results, Hastings explained that Netflix “is running very well in terms of content,” noting the success of titles such as Strange things i Ozark.
“We’re improving everything we do around marketing, improving service, merchandising, and all of that only pays off,” he said.
“If there was only one thing, we could say Strange things. But again, we’re talking about losing a million instead of losing two million. So our enthusiasm is tempered by the less bad results. But looking ahead, real-time transmission works everywhere – everyone is pouring into it. It is certainly the end of linear television for the next five or ten years. Very optimistic about the broadcast. “
Hastings, who has been prophesying the death of television over the past decade, recently highlighted Nielsen data showing that Netflix’s share of American television is rising.
The measurement company’s monthly follow-up, which will be released on Thursday, will show Netflix’s overall share for television in July at 7.7%, up from 6.6% in July 2021.
In its letter to shareholders, the company also noted Nielsen data showing that Netflix outperforms the competition for total viewing time by more than 1.3 trillion hours for the 2021-22 television season. compared to the nearest rival CBS 753 billion.
Later in Tuesday’s call, director of operations and product manager Greg Peters was asked how Netflix would do that its next level of advertising “is a better advertising experience than is available on television today. “.
“I think we’re seeing this as an extension of two things we believe we’ve done historically, which is, one, being very consumer-focused and thinking about the customer experience,” he said.
“And also just having an innovation-oriented vision, whether it’s how we started streaming and how we think about the great quality of experience and innovations we’ve led and I think about the discovery and the side of the choice.We take an iterative approach.This is what we call the “Drag, walk, run” model. So at first, it will seem like what you know. “
Play more live and on-demand entertainment news with Flash. More than 25 news channels in one place. New to Flash? Try 1 month for free. The offer ends on October 31, 2022>
In both the United States and Australia, the number of TV viewers has gradually declined, first with the increase in original cable TV content and later with the advent of streaming services.
Earlier this year, a report commissioned by the Australian Department of Infrastructure, Transport, Regional Development and Communications found that on-demand video subscription platforms had surpassed live television for the first time.
The Social Research Center report showed that 83% of Australian adults make use of online video services, 81% more than in 2020, while only 77% tuned in to live television, below 80% of 2020. previous year.
Netflix dominates the Australian streaming market with 67 per cent of subscribers subscribing, compared to only 27 per cent of Disney +, ranked second.
But while linear television fights Netflix, it has the obvious advantage of being a free source of quality content 24 hours a day.
How The Virgin points out, one of the most watched programs in America, Grey’s Anatomyit has gone from an average of 20 million viewers per episode to four million still impressive.
And in the United States, broadcast television is about to get a major update in the form of ATSC 3.0, also known as NextGen TV, which supports 4K resolution, HDR, 120 frames per second and other features.
Shelly Palmer, a professor and media commentator at Syracuse University, wrote Wednesday that the only thing that could kill television would be the loss of the NFL.
“Reed is one of the smartest people I know, so I know he knows that the only thing that can possibly kill linear television is for the NFL to move away from television in 2031 when the current contract ends.” he wrote.
“If the NFL goes up again, that is, if television has the money, which it may not, then linear television will broadcast (broadcast television channels and local television stations broadcasting their television signals to America) will live for the duration of the new contract.
On the other hand, he argued, if Netflix or another streaming service – or group of services – buys the NFL’s exclusive rights in 2031, “then Reed is absolutely right.”
“Linear TV will die from an accelerated (but still painfully slow) death, a death full of reruns of very old programs, syndicated content, reused news presented by AI-generated journalists (or unpaid inmates), etc.,” he said. to say.
If you want to understand what a “non-sports” linear television scene could be like, study the radio business. It suffered the “final fate” of television some time ago, but against all odds, it’s still an annual business of $ 10 billion ($ 14.5 billion). Because? Because it’s free to use. “
Netflix results drive the industry
Netflix’s results and improved market outlook also extended to other companies in the industry: Disney’s price rose, as did U.S. streaming company Roku.
The streaming giant had a particularly good quarter in Asia Pacific, the regional umbrella under which Australia falls. At APAC, Netflix added 1.1 million paid subscribers and increased its revenue 23% year-over-year, compared to an overall revenue growth of 9%. He revealed that his average income per member increased in Australia.
The news was a welcome respite for the business under siege, which has been months on a wave of bad press, intensifying from its previous quarterly results.
Over the past three months, Netflix has reduced its operating costs by laying off hundreds of its workforce, revealing today that these moves amounted to $ 70 million in compensation costs. He also wrote down $ 80 million worth of his books, due to real estate.
In his letter to the shareholder, the streamer stated that he now has a better understanding of the market challenges (account sharing, competition, macroeconomic pressures) that caused his disastrous previous quarter.
“First, we need to continue to improve every aspect of Netflix,” he said.
“This focus on improving our core service has served us well for the past 25 years and continues to be our North Star to drive continued growth. That’s why we strive to achieve an ever-improving content, marketing and product experience. “.
Netflix fired at its competitors emphasizing that it was a “real-time playback business” that “was not affected by inherited revenue streams.”
Netflix specifically said it wasn’t in debt with “expanded or exclusive movie windows” and that it could allow subscribers to “watch TV if they want to, without having to wait for a new episode to come out every week.”
Although he did not name his competitors, these examples probably refer to people like Disney (who mainly launches their streaming series such as Obi-Wan o Mrs. Marvel weekly), and HBO Max and Paramount + (published by Paramount Top Gun: Maverickwhich has a longer theatrical window than the typical 45-day closing period of the studio).
These statements indicate that Netflix feels the pressure to differentiate itself in a saturated market as it is challenged by its dominant position.
The streamer revealed more details of its upcoming introduction of a cheaper advertising-compatible membership level, which is now slated to be released in early 2023 and only initially in a handful of territories.
The company said it hoped the new offer would take time to increase enrollment and advertising revenue. “In the long run, we believe that advertising can enable substantial incremental membership (through lower prices) and profit growth (through advertising revenue),” the company said.
Last week, Netflix announced that Microsoft would be its global technology and sales partner for its advertising level.
Netflix also updated its crackdown on password sharing. He said he was “encouraged” by the first results from various Latin American territories where he is testing a way to charge the 100 million customers who share their passwords beyond their home.
It is testing two different formats, one that allows subscribers to “add a member,” while a new test will be rolled out in Argentina, Dominican Republic, El Salvador, Guatemala and Honduras starting next month where customers can “add a home.” .
In a blog post, Netflix said it was “working hard” to figure out how best to charge for password sharing. He promised that nothing will change in other countries until “we better understand what is easier for our members.”
Repression will begin in 2023.
– with Wenlei Ma
Read related topics: Netflix