Many entertainment executives have been waiting for the downfall of the company. This may not have been the way they wanted it to happen.
In the first three months of the year, it lost more subscribers than it signed up, reversing a decade of steady growth. The company's shares lost about $50 billion in market value on Wednesday. The stock of companies like Disney, Warner Bros., and Discovery declined as well.
The war in Ukraine was one of the reasons why the company dropped all of its subscribers in Russia. The moment was decisive in the streaming wars. They may have a chance to gain ground on their giant rival.
There are a number of questions that will have to be answered in the coming months as more traditional media companies race toward subscription businesses that are similar to what Netflix created. There is too many streaming options. How many people are willing to pay for something? Is this business more reliable than the industry has been doing for years?
They switched from a sound business model to an unsound one, according to the veteran entertainment executive.
The media industry, worried about declining movie theater ticket sales and broadcast television ratings, has been reinventing itself to compete with streaming services. Disney has invested a lot of money. Discovery and WarnerMedia merged to better compete with streaming giants. CNN's streaming version has drawn little interest from subscribers.
There is a lot of risk in those investments. The streaming market may be a giant over the long term, but the next few years could be difficult, said Rich Greenfield, an analyst at LightShed Partners.
No matter what, it looks less profitable and that is a problem for everyone. Increased costs and fewer subscribers mean less profit for everyone.
Churn rate is a concern, some analysts say. Kevin Westcott, vice chairman of the consulting firm, said that consumers are becoming more wary of rising prices for streaming services and are more likely to cancel a service when a favorite show comes to an end. 25 percent of U.S. customers have canceled a streaming service only to re-subscribe within a year.
They are frustrated that they have to have so many subscriptions to get everything they want.
Disney will report subscriber numbers on May 11. The distress signals surrounding the streaming business will grow louder if Disney's figures fail to live up to expectations.
There was fear among Hollywood talent agents on Wednesday that the gravy train could slow and that the company's willingness to pay whatever it took for scripts and talent deals could disappear. The same happened to producers. Over the past five years, the company has spent hundreds of millions of dollars on the Academy Awards. It has yet to win a best picture Oscar, but its commitment to prestige filmmaking has been praised.
The effect on us will be if the new reality forces them to cut back on their $17 billion-a-year programming budget. Will they stop taking risks if they have to cut back on programming?
Fierce competition is a reason that growth has slowed. The company used to say that its main competition was from diversions like sleep and reading.
Now there is a question about whether or not the original content is strong enough to set it apart, as even deeper-pocketed companies like Apple and Amazon continue to increase their spending on critically acclaimed shows.
Where is the new stuff that is just crushing it? The analyst asked where the new franchises were. He noted that popular shows would soon be ending their runs.
There have been signs that interest in the library has peaked.
The demand for each title on the catalog is pretty much the same, according to Alejandro. That is a big difference.
Rivals could make more targeted efforts overseas if they decide to reconsider their international expansion plans. In the United States and Canada, as well as in Europe and Latin America, the number of subscriptions declined.
The analyst said that they spent a ton of content and are making more local content. They have done the right things, but have hit a wall.
The first-quarter results were released on Tuesday and the executives of the company seemed jittery. Reed Hastings, the company's co-chief executive, once swore there wouldn't be ads on the service, but now says the company might introduce a lower-priced tier in the next year or two. In the past, it said it had no problem with password sharing.
When we were growing fast, it wasn't a high priority to work on.
Disney, Warner Bros., Discovery and Paramount have vast advertising infrastructure. Some analysts wondered if there was already market saturation in the United States.
Mr. Hastings tried to assure everyone that the company would solve its problems. He said the company was getting back into its investors.
Barnes gave reporting.
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