May 25, 2022 | Authored by: Vindicia Team Blogs
What’s going on in the streaming subscription space?
The past few months have been tough for streaming companies; notably, Netflix whose subscription number dropped by 200K, the company’s first ever recorded subscriber loss. This was followed by a sharp drop in share value and even a lawsuit from shareholders. Around the same time came the spectacular rise and fall of CNN+. You might be forgiven for thinking that we are entering a post-streaming era but hold on! Here’s my take on these recent events in the streaming subscription industry, and some of the surrounding issues:
Growth doesn’t last forever
One of the takeaways of the Netflix crash is that no matter how successful a business may be, growth is never continuous. At some point, growth will begin to slow down, and that goes for subscription services too. In fact, subscription companies tend to follow a similar trajectory – a lengthy period of hyper-growth before entering a slower growth period. This is natural and to be expected.
The subscription model still shines
Bad news makes good headlines, but the truth is often more complex. Sure, Netflix might have missed on the top line, but the company is still ahead on the bottom line, and that is a critical piece of the puzzle. The subscription model is flexible, far more so than other business models, and slowing growth does not necessarily translate to lower margins.
What’s up with Wall Street?
What happened with Netflix is the perfect example of how Wall Street needs to revisit their model valuations for subscription businesses. At the end of the day, Wall Street doesn’t yet fully understand the hybrid ecosystem, or the fluidity that is built into it. Moreover, the COVID pandemic pushed the industry five years into the future, way ahead of its time. Wall Street folks are either overreacting now, or their models were overly optimistic. Whichever it is, the whole system needs to rebalance its true footing in order to continue to grow, and that might just be what we are seeing now.
One thing Netflix should not do is overreact and deviate too much from the business strategy and brand essence. If their strategy is anti-ads, for example, they should stick to it. After all, Netflix is still the biggest streaming service, and the market-maker. Time will tell of course, as latest reports emerge that Netflix is indeed considering offering a low-cost, ad supported streaming option. Even so, as a general rule, drastic reactive moves are almost never a good idea, and it pays to remember that.
Despite the mini tsunami in the industry when news of the CNN+ debacle broke, this actually looks more like a casualty of Warner Bros-Discovery merger politics, rather than an indicator of the streaming wars. No company is immune from internal politics and the tremors that come with it. In any event, the content on CNN+ is here to stay – we’ll still see it on HBO Max and Discovery+, both of which include content from a multitude of channels. While CNN+ is dead, the content and customer demand is very much alive; it will simply exist elsewhere in the streaming space.
Is it the end of streaming subscriptions?
IMO, no, but it is the start of something new: customers who are more aware, and businesses that are more agile.
Aware customers balk at friction and demand better subscription experiences. Agile businesses leverage tools to help solve subscription pain points in a creative and revenue-generating way.
Instead of cutting back on streaming content, look at how to cut back on passive churn. (With Vindicia, subscription companies are reducing churn dramatically and seeing revenue increase immediately.) Instead of resorting to advertising, consider how to offer personalized bundles so you can improve customer LTV and increase revenue that way.
Before changing the product – and clipping the wings of your business – check your subscription intelligence data and analyze your subscription ecosystem. Is the payment process optimized? Is the user journey personalized? Does your product or service give value?
It’s not the end of streaming subscriptions. It’s the beginning of a new way of doing business. That’s the big message from the recent Netflix and CNN+ stories.
On the CMO's agenda: 7 unexpected ways to improve retention and other KPIsDownload