On May 15, Netflix (Netflix) is preparing to enter the field of live broadcasting and launch live talk shows and reality shows. Previously, in 2020, Netflix hosted an offline talk show called “Netflix Is A Joke fest” in Los Angeles, inviting more than 130 talk show stars. It was hard to get a ticket, and viewers who did not buy a ticket could only record the show. This may have inspired Netflix to offer live streaming.
Earlier, Netflix, which has always relied on an ad-free subscription model, announced in its earnings conference call that it would launch a low-cost subscription service with ads by the end of 2022 and crack down on account sharing. CEO Reed Hastings told the company’s employees that they can leave if they do not like the content.
Netflix’s response to trying to get out of its profit dilemma: Launching games, e-commerce and then moving into live broadcasts, introducing multiple subscription models and cracking down on account sharing. Many fans expressed disappointment, and many even said they would no longer subscribe once a new subscription model was introduced.
The poor Q1 earnings report and subsequent slump in the stock price was the direct reason Netflix stopped advertising for the first time. According to the financial report, Netflix’s revenue in the first quarter was $7.868 billion, up 9.8% year-on-year; net income was $1.597 billion, down 6.4% year-on-year. During the period, Netflix lost 200,000 subscribers, its first decline in more than a decade. Netflix, which used to be one of the FAANG star stocks along with Apple and Google, fell from a high of $700 to a low of $175.81, dropping back to 2018 levels.
Unlike Disney’s multi-platform matrix, revenue from a single subscription platform is highly dependent on pricing for members and member services. If it is difficult to increase the former, it is necessary to increase the latter. In the past, Netflix has tried several times to increase the price for members. This price increase directly resulted in the loss of 200,000 users, which led Netflix to think about the problem of a single subscription system and turn to “subscription + advertising.”
In addition to Apple TV +, many North American streaming media platforms such as HBO Max and Hulu have introduced low-cost subscription services that include advertising. Netflix members have raised prices several times, which is not attractive in terms of price and has led to an epidemic among users. It is imperative to offer a variety of low-cost options for paying for entertainment.
Competitor Disney+ is also making the same decision as Netflix. In March, Disney announced that Disney+ will launch an ad-supported subscription service in the U.S. in the second half of the year, with international expansion planned for 2023. This will help meet Disney+’s goal of reaching 230 million to 260 million subscribers in fiscal 2024, Disney said.
After the U.S. stock market closed on May 11, Disney (DIS.US) released its financial report for the second quarter of 2022. According to the report, Disney’s media and entertainment revenue was $13.620 billion, up slightly from the same period last year; the corresponding operating profit was $1.944 billion, down from $2.871 billion. As of April 2, Disney+ subscribers worldwide totaled 137.7 million, up from 103.6 million in the same period last year, representing 33% growth.
Although Disney+, which launched more than two years ago, has not yet reached its ceiling and its user base is still in a period of rapid growth, given Netflix’s 220 million members, Disney+’s ceiling may not be too far away. Disney+ is also struggling with profit issues and high content costs, as evidenced by the increase in revenue and decrease in profit. Disney explained this by saying that “the early suspension of authorizing content for a particular customer” – broadcasting its own streaming media, strengthening content exclusivity, and building barriers will continue to be a long-term trend in the future.
In February of this year, Disney’s various streaming media platforms entered the live broadcast space by live testing the Oscars and trying out the direct-to-consumer (DTC) business model. the Will Smith slap incident caused attention to skyrocket and subsequent Disney+ programs such as “Dancing with the Stars” will also be broadcast live. For talk shows, reality shows and other forms, live broadcasting can greatly increase the sense of interaction and user enthusiasm for participation, which is in line with the trend of increased content interactivity in the future.
According to research firm Coresight Research, the U.S. live streaming market will reach $11 billion this year and about $25 billion by 2023. Compared to the trillion-dollar domestic live broadcasting market, the overseas market, which is still in an early stage of development, is still a blue ocean. The rise of Tiktok and Bigo Live has led more Internet platforms to recognize the potential of live broadcasting. Amazon, YouTube, and Instagram have all launched live e-commerce features.
Whether Netflix launches subscription-based live broadcasting to complement its existing episodes and movie content, explores live broadcasting for rewards and monetization, or plays the “content e-commerce” card in the future, it’s obvious that live broadcasting and its e-commerce business are linked.
