Netflix practically admitted during yesterday's earnings call that there is some tough competition out there and Netflix needs to step up its game. Revenue and subscriber growth have clearly slowed, and content just isn’t hitting the mark.
The company acknowledges this need for improvement. Ted Sarandos, co-chief executive officer and chief content officer, Netflix, said, “Honestly, we've got to compete, and we've got to continue to improve on the core service, which is making TV series and films and now games that people really love.”
Movies with big names like “Red Notice,” starring Gal Gadot, Ryan Reynolds and Dwayne the Rock Johnson have flashy action sequences and expensive-looking props, but it wasn’t enough to win an Oscar, let alone satisfy subscribers. It's also alarming that Netflix continues to burn time and money on these big films. "Red Notice" cost $200 million to make and only has a 36% on Rotten Tomatoes... yikes. It's one of the most expensive movies Netflix has made to date. "The Irishman" is a close second at $150 million.
But quality isn’t synonymous with expensive, and Netflix doesn't have to spend so much on content if they don’t really need to.
Look at Apple TV+'s "CODA" which cost less than $10 million to make. If a simple and sweet film like "CODA" can win Best Picture without fancy casts and movie sets, then it's something to note. If Netflix continues to largely focus on A-List cast members instead of quality storylines and content, they’re not going to be able to keep up with their competitors.
On the earnings call, Sarandos also acknowledged that it doesn't have enough hits coming often enough.
"...We were not happy with the top-line subscriber growth," he said. "We have to have an ‘Adam Project’ and a ‘Bridgerton’ every month and to make sure that that's the expectation of the service constantly. So we're definitely feeling the higher levels of penetration in those markets of users, and we're definitely feeling a heightened level of competition for sure.”
Choosing this strategy of pushing out hits every month could be overambitious, even for a veteran like Netflix.
While Sarandos added that the company will continue to invest in quality content and bring more variety to the table, if they continue with the strategy they have now -- we aren't quite sure if this will pan out the way they hope. There is some benefit to pacing shows, as other streamers are discovering, to keep users tuning in weekly, instead of just binging and leaving. "Game of Thrones" famously accomplished this for HBO, but now it's the norm for all sorts of popular series across services.
And while Shonda Rhimes was a great decision for Netflix, bringing valuable shows like “Bridgerton," which had a viewership of 82 million households in its first 28 days, it could have helped Netflix if it was doled out more slowly. “Inventing Anna,” with 3.3 billion minutes watched for the week of February 14, per Nielsen, could also have benefited from this model.
However, there are other decisions that Netflix has made that didn't work out as planned.
Netflix’s unscripted series "Is It Cake?" was a miss, receiving a low audience score of 41% on Rotten Tomatoes. The streamer latched on to a trending online meme of cake resembling objects, which is arguably overdone, and rolled with it in hopes to bring more subscriber growth. The show is also too similar to its other wild and experimental cooking titles like "Best Leftovers Ever!," "Cooked with Cannabis" and "Nailed it."
“Love is Blind” was another fun show that did really well, especially in the context of the online dating scene with millennials and Gen Z. The show had over 1.4 billion minutes of viewing time the week of February 14, according to Nielsen. But Netflix already has an overwhelming amount of dating shows such as "The Circle," "Too Hot to Handle," "Love on the Spectrum" and so on. So the recently released show "The Ultimatum: Marry or Move On” unsurprisingly flopped, receiving a Rotten Tomatoes audience score of 12%.
The point is, just because one show works doesn’t mean subscribers need several others just like it. This formulaic model of programming feels too algorithm-reliant in its decision-making process. Greenlighting quality content requires a human touch.
If the company focused more on acquiring carefully curated titles instead of throwing money at big names and the next big trend, maybe they could rise once again.