Netflix loses subscribers and Hollywood cheers. Maybe it shouldn’t.

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Hollywood spent years ignoring Netflix. Then he spent years resenting it. And more recently, Hollywood has been contorted trying to be Netflix. But now things are different: Hollywood is happy to tell you how badly Netflix has run aground.

“That’s all everyone wants to talk about,” says one talented representative who is happy to describe, anonymously, because like most people in the city, he does business with Netflix and wants to continue doing business with Netflix. ways in which Netflix has been mismanaged. .

This was much easier to do after the shocking Netflix earnings report in April, when the streaming company, which has always been defined as a growth machine, announced that it had lost subscribers for the first time. once in a decade.

But you can’t enjoy the fall of Netflix if you’re falling too. Which means a lot of people who make money from movies and TV shows have to convince themselves that the current problems with Netflix – the company has already announced that it will lose 2 million more subscribers this spring – are the problems with Netflix. No theirs problems.

This is because the other scenario, that Hollywood and Wall Street have misjudged the consumer’s appetite for video streaming, would have huge domino effects. Companies that hoped to sell subscriptions to hundreds of millions of people around the world would have to restructure. People who pay rent by doing entertainment could see the endless tap of production work begin to spread.

And consumers who have become accustomed to an endless buffet of entertainment, often sold at a loss, may end up with fewer options and higher prices. That’s what a senior executive from one of Netflix’s top competitors tells me will happen, not immediately, but finally.

“From a consumer experience [perspective], things will get a little worse. They have enjoyed a lot of subsidized and unsustainable choice, “he said.” And I think there will be a little less choice in the ecosystem. “

There is even a phrase, whispered in a low voice, for fear that the good times, caused by the billions that Netflix and its competitors spent to secure the content, may come to an end: The Netflix Chill.

You can see the outlines of how it looks on Netflix itself. It has already cut staff, with more layoffs on the way. He’s also pouring into projects he was developing: a network boss I spoke to says he’s started seeing a lot of presentations for things that used to be attached to Netflix, but have now been released, a group which includes a project announced with fanfare. last year of the former royal Meghan Markle. And, most surprisingly, Netflix will start selling a version of its ad service, after spending its entire life insisting it never would. (Disclosure: My employer, Vox Media, sells programming on Netflix.)

But for now, most media outlets are happy to argue that Netflix has been discovered on its own, leaving everyone else free to say I told you, even if they say something else recently.

“We know that without you, we would only be Netflix,” Fox Sports CEO Eric Shanks told advertisers at the company’s “initial” sales event last month. It’s a joke that certainly would not have happened two years ago, when the first wave of the pandemic put the advertising business in a dizzying at the same time as Netflix added a record number of subscribers. Now, it’s a very safe roast.

“If you want to be one of the big guys, act like a big guy,” says another talent rep, anonymously, again, because he’s still busy grabbing Netflix money.

Here are some things Netflix should do to change: market its individual movies and TV shows instead of marketing Netflix; make better films and put some in cinemas, and not just in a handful of places to compete for awards, but in many cinemas where a lot of people can see them; stop publishing all your programs at once and distribute them weekly.

In short, do all the things that traditional media companies did before Netflix changed the industry. One related criticism is that Netflix could solve its problems better. That’s what Roy Price, the first executive to lead Amazon’s streaming foray, thinks. (Price was expelled on charges of sexual harassment, which he denies.)

“I think Netflix has a programming problem,” Price told me. “What was Netflix’s last big show?”

This argument: replacing executives who chose your TV shows and movies and replacing them with someone else is the oldest media argument out there, which doesn’t mean it’s wrong. For now, however, Netflix insists that all of its top executives, including co-CEOs Reed Hastings and Ted Sarandos, and content heads Bela Bajaria and Scott Stuber, they are doing very well.

These are the most comforting criticisms of Hollywood because they allow Hollywood to expect things to continue as they have been. Under that theory, even if Netflix shrinks, there will still be a lot of competition among other big players to keep everyone fully occupied, and a lot of things for streaming customers to take advantage of over the next few years. And these competitors will include Amazon and Apple, which do not seem to have any restrictions on their spending, as Hollywood is a secondary business for both.

It’s also worth noting: depending on what you’re doing in Hollywood right now, you can choose which projects to work on. An art director based in Los Angeles tells me that he is not remotely concerned about the slowdown in the real-time transmission boom because the studios are struggling to staff the projects they are already doing. A study executive tells me that labor shortages are even more acute outside the United States, in film centers like London.

But, as we are seeing in the stock market right now, nothing goes up and goes well forever. So the nightmare scenario for Hollywood, or at least the nasty version of dreams, is that Netflix’s problems are everyone’s problems. And if Netflix is ​​already losing customers to newcomers, that means the market isn’t as big as everyone expected.

“You have to understand that the economy of these things only reaches 400 million subscribers,” one tycoon told me, noting that Netflix, which still has the largest audience in the world, barely reaches 220 million subscribers. What if investors decide they no longer want to fund the world’s entertainment giants if those giants don’t make money?

To begin with, it could cause problems for people like Candle Media, a holding company set up by two former Disney executives and backed by private equity giant Blackstone. Since its inception last year, it has spent a lot of money, acquiring all or part of at least five different production companies, including Reese Witherspoon’s Hello Sunshine and Will and Jada Pinkett Smith’s Overbrook, often at astonishing prices: the agreement to acquire a stake in the Witherspoon company, for example, gave it a valuation of nearly $ 1 billion, even though it owns little intellectual property.

The premise of Candle Media, shared by other investors who have been investing money in celebrity-linked production companies like LeBron James and Kevin Hart, is that streamers will be desperate to find new things to show people and stock up on. and companies that can make these things a good deal. But many of those deals came together last fall when Netflix’s share price approached $ 700; now Wall Street believes the company is worth two-thirds of that.

Candle co-founder Kevin Mayer continues his story. “We still believe a lot in broadcasting in general, now and in the long run,” he told the Hollywood Trade Deadline last week.

And he’s right in at least one way: streaming won’t go away, just as the Internet didn’t go away after the dot-com bubble burst in 2000. But the winners and losers certainly reorganized afterwards. by accident, most of you can’t tell me what CMGI is without using Google. We haven’t known the end of this for a long time.

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