The end could be nigh for Netflix
Contrary to popular belief and its eye-wateringly high investment in content, Netflix may be on shaky ground, leaving TV audience eyeballs still up for grabs, writes Wavemaker’s Jamie Connolly.
I don’t know if you’re like me, but I find that I spend as much time trying to find something to watch on Netflix, as I do actually watching it. In fact, I sometimes don’t find anything, and end up flipping back to traditional TV.
I know a survey of one puts you on dangerous ground when it comes to identifying trends in consumer behaviour, but Nielsen’s latest Total Audience Report in the US backs up my hunch – it showed that SVOD viewers are moving back to traditional TV. And, not surprisingly, there’s a catchy name for this growing sub-group of viewers: they’re called ‘go-backers’.
According to Nielsen’s report, 58% say they go back to their favourite traditional channels; 44% like to scan through traditional channel options; 39% scan the program listings and 31% browse their DVR recordings. By comparison, only one third of adult respondents said they browse their SVOD content menus for more content.
“I don’t know if you’re like me, but I find that I spend as much time trying to find something to watch on Netflix, as I do actually watching it. In fact, I sometimes don’t find anything, and end up flipping back to traditional TV.”
I guess I’m in the 42%, because If I can’t find anything on Netflix, I’ll just go to Youtube.
I don’t think I even have an aerial plugged into my TV anymore.
With a market capitalisation 8.5 times revenue, the stock market thinks Netflix has a fantastic future.
Traditional TV is terrible, particularly in Australia, where reality shows rule and not much else in the form of decent viewing. Yes Netflix is full of a lot of stuff I’ll never watch, but their big-iconic shows like Stranger Things and Narcos help set them apart and put them on a similar level to HBO.
Netflix just need to get their movies offering right which is far from great. With Disney + on the horizon we’ll see a higher standard of movies on the platform, but how will the TV shows stack up. The up and coming ‘The Mandalorian’ looks good but from the trailers feels very ‘TV’ versus ‘cinematic’ in its look.
Traditional TV needs to up its game and bring the same level of quality and innovation versus endless ads, often the same ones repeated over and over at every chance of a breather.
Everybody thinks Disney+ will have a seismic effect on the industry but I see it as exacerbating the overall problem, which is the distinction between content production and content distribution. Every producer is still trying to own the entire vertical, which has forced Netflix into content production since it’s the only way it can survive as more Disney’s start taking back their own content.
Meanwhile this is completely at odds with what users want, and the original promise of Netflix, which was a content aggregator – a one-stop shop for as many movies and TV shows as possible. Their inability to deliver on that promise – which is not entirely their fault – is ultimately going to be the end of SVOD as it currently stands. Once everyone realises that the market can’t sustain so many SVOD providers – because there’s only so much money to go around in an average family – the Hunger Games will begin and a new round of consolidation will occur.
Netflix is still far-and-away the leader in the user experience and technology. If they can just tough out this next phase of content confusion I still see them as having the potential to emerge victorious.
Spot on!
This is all based on a false dichotomy though, isn’t it?
One quick look at the nature of the programming on each and you can see that the two serve quite different functions.
So with a maximum price of $17.99 in Australia for Netflix, why can’t the two co-exist?
Isn’t your initial data characterising ‘go-backers’ more proof of the above rather than a binary switch?
… if people who are going back to “traditional” (ie “free”) TV are called “go-backers”, presumably the sensible people who have better things to do with their money than spend it on paying to watch TV programs are now called “never-lefters”?
So let me get this TV viewership of 18-49year olds is in decline (and the younger the range the more dramatic) but 55+ is increasing. So future would be what…..and hey lets use a sample size of 1 to highlight behavioral and satisfaction of the Netflix service. Netflix is here to stay, different price points, different tiers, different content release windows, product options and dare i whisper it potentially advertising. The question is with HBOMax, NBCU, Disney+, Kayo, Stan, Apple the consumer options are huge. Add them all up and still cost less than the old crap Foxtel bundles…..but thats the old world some are not going to able to survive, hold on tight its going to be one help of a ride.
word salad
When I first started studying TV ratings back in the ’90s as Austar, East Coast TV, Foxtel, Galaxy, Optus Vision etc. in their various guises started challenging the Free-To-Air channels, all eyes were on the 16-24s.
And yes, their TV viewing levels were dropping to way less than the ‘All People’ levels. The pundits all cited that as a change that would never be reversed and TV as we know it would eventually die.
Some 25 years later all those 16-24s are now in the 40-54 cohort.
And you know what? Their viewing levels are higher on average than they were a quarter of a century ago (but not at the same level as the prior 40-54s).
Early adopters’ lives change and a sizable chunk of them revert to the median.
Of course TV will never have the viewing levels due to the explosion of content and channel choices. Just like cinema didn’t die when TV ascended. Cinema will never be what it was in the middle of last century, but hey it it still kicking goals (which I think is covered in the Box Office data reported elsewhere in Mumbrella today).
Totally agree. Gave up trying to find stuff on Netflix and switched off for good. Will pay the months subscription fee in 5 months time when there’s new material to watch and then sign off again.
If you like sport you have Foxtel. End of story.
*Australian Sport that is…
Sports coverage on Foxtel is focussed on AFL, NRL and a bit of Rugby. Even the overseas Ashes tour has gone.
Pretty sure it’s on the anti-siphoning list, so there’s no way Fox could get their hands on it anyway
Nine’s Ashes was the last piece of their TV deal
*Kayo
you’re smart and this article is good. thanks.
I’m really waiting for Ben Shepherd to weigh in here.
Nothing to say here but thanks for thinking of me.
Do I believe that Netflix will collapse due to the overwhelming quality of content on such world class networks as 7 and 10? Do pigs fly? Good on you Wavemaker, continue with your head in the sand.
Not about the quality content on 10 (I heart the bachelor) more about the business model – US$10.4bn debt in 2018 x x x
Amazon was in massive debt for ages. They turned out OK.
Not about what 7 or 10 have. It’s about what Netflix have. If interest in their own library is declining, people stop subscribing. And with $5 billion added to their debt pile in just the last 12 months.. fair to say Netflix needs something bring to turn the revenues around.
Don’t think it’s dying because of the appeal of traditional tv (don’t think the author said that).. Netflix is struggling because of its own diminishing quality of content. This means people are looking around for other things to watch – which I think is the opportunity for traditional tv the author is making
Netflix is boring as.. Would rather watch re-runs of Hogans Heros
I want the time it took to read this back.
Sorry but this piece is soo disconnected it isn’t funny, what do Wavemaker want to achieve through this?
Agency confidence declines for me after this
Thanks Jamie, I enjoyed reading your insights on the TV audience. I gave up my Netflix sub because I couldn’t decide what to watch and thought it was just me! Currently at my place it’s a mix of Foxtel and FTA.
Netflix needs a pivot. Going head to head with established media giants won’t work. Netflix needs to return to what got it to this point, ahead of its time thinking.
Maybe they can bring us the first VR/AR show or film?? I don’t know, but going head on with Disney in particular, is not gonna end well
I can’t be the only one who was more annoyed by the wrong Netflix logo being used, than the delusional article content.
Rain man,
That is our bad, not the author’s. It has been updated. You may now redirect your annoyance.
Thanks for flagging,
Vivienne – Mumbrella
The Murdochs sell 21 Century Fox etc to Disney. Disney+ launches in Australia. Disney+ is in the driver’s seat if they want to negotiate a content deal with Foxtel. If no deal, Disney+ competes against Foxtel with content that Murdoch used to own (through 21st Century Fox). Foxtel is News Corp’s largest problem child by far. So, by selling 21st Century Fox to Disney, News Corp has weakened and may have a very substantial issue on its hands in a couple of years (or much sooner…) with Stan, Netflix, Disney+, Prime Video et al charging customers <$100 a year (which would equate to less than $300 million in revenue for Foxtel, based on 3 million subscribers, if they charged the same vs current revenue of around $2.2 billion in FY19 (I think?)). In hindsight, though different selling entities and obviously, Murdoch should have attempted to sell Foxtel as well to Disney, or brought them in as equity partners. Now, with limited control of content, which Murdoch had before, the negotiating position with Disney is terrible.
Disney bought the assets it was interested in as part of the deal with Murdoch. The parts of the company that made no sense to them (or couldn’t buy) stayed with the Murdoch family. It would make zero sense for Disney to want Foxtel.
That is correct Dan, it made no sense for Disney to buy Foxtel, but it made a huge sense to spend $71 billion on 21st Century Fox. Had Murdoch accepted $70 billion instead, with Disney putting $1 billion into Foxtel, the 21st Century Fox deal would have looked equally great for the Murdochs (publicly – particularly as nobody would be likely to know the alternative) and quite possibly saved the Murdoch’s a huge amount of issues now. For Disney, they would not have spent anymore in total and in fact gained an equity stake in Foxtel. That’s why!
This is very ignorant to Netflix’s business model. As a content aggregator it doesn’t really matter to them whether a show is good or bad (as long as there is enough of both) as they can monetise every single show across their whole user base, compared to traditional TV which is limited to a couple FTA channels and an SVOD service with a tiny amount of users compared to Netflix. Like most things in life, there’s a lot of crap of everything out there, and it takes a bit of effort to find the quality.
Netflix needs to pivot, then when this is done, they can flip it on it’s head, the whole thing in one go. And just when the competition think they have them covered, they can reverse it to then flip it again and finally just turn it slightly.
Problem with Netflix is the binge model – when a good show comes out everyone binges it in a weekend, people talk about it for two days at work, and it’s over.
The traditional weekly episode release keeps the hype going, keeps people talking about a show, and keeps people coming back for longer.
There’s also something to be said about the “channel flipping” model where you don’t really know what you wanna watch, but you just wanna flip through and watch some old episode of Seinfeld just because it’s playing. Like you wouldn’t go out of your way to actually start that on demand, but if it was playing on a tv in a hotel I’m in I’d watch it.
If Netflix were to adopt some of these traditional models I think it would do much better. Apparently Disney+ is considering this episodic model too.
I have been a Netflix consumer for some 4 or 5 years now, and I fit into the 55YR PLUS CATEGORY. In fact will be 70 in a few weeks. Obviously had been a Free to Air viewer most of my life. My kids encouraged me to try Netflix and because cost wasn’t a lot, (I pay $9.99 a m9nth) I agreed. At first I watched quite a lot of movies and series, but more recently I have found less shows which suit my viewing. Mostly now I keep Netflix for one series, Outlander. I looked elsewhere because Netflix was taking up to a year for the next series so in order to watch as the series grew, I looked into Foxtell. The cost for Foxtel was huge in comparison, but I was offered a deal by my NBNProvider of $20 a month, so have both. Truth is I will need to make a decision about either or very shortly as the deal will expire end of the year and the Foxtell cost will double and more then. Cost wise of course Netflix is my best option, content wise Foxtell. If Netflix gets its content right, I will obviously prefer their costs, but a delay of over a year for the previous Season 4, with season 5 to be aired early next year, it doesn’t make sense for me if I want content. Confusing, yes it is, it is for me too, I don’t really win with either choice.
oh my god.
Get FOXTEL IQ4 and receive both foxtel and netflix
If Adlanders ever went west of Newtown/north of Fitzroy, they would realise how out of touch with consumers some of these article comments are. The plural of anecdote is not evidence – there’s an awful lot of people still watching TV, and there are reasons they prefer it over streaming.
Jamie’s right, Netflix is cooked unless they can license well and find a niche/stickiness mechanic outside of their first-mover advantage.
I compare Netflix’s movie offerings to back in the days when you got to the video shop late on a Saturday and there were only weeklys left on the shelf.
I don’t care about series, I don’t binge watch anything. So for movies I think Netflix is rather lame.
So TV viewing is statistically in decline for young people but some old people are moving back to traditional? THAT is how you substantiate your own idea that Netflix will die out and tv will return?! Mumbrella is hilarious, it’s literally just agencies making fabricated pitches for the things they (Deardy Chambers! What a coincidence!) happen to make money off.
I agree that I flick through Netflix’s repertoire of uninteresting programs far too much and all because there is nothing there of interest. The point that’s being missed here is that free to air tv is completely butchered by the ridiculous amount of advertising that destroys watching a good movie or series. That’s why people go to the Netflix format. If however, the shows are not of interest, then it almost (and I emphasize almost) defeats the purpose. The two issues that stand out are advertising and program quality. If the Netflix format goes, I would go back to watching DVDs – just to spare me from the almost incessant nonsense of over frequent advertising.
This is not a zero-sum game. There is enough room for several globally dominant SVOD platforms.
Are people here really saying that massive debt without a long-term road out of it doesn’t matter?
Good Lord… you sound like Central Bankers!
What a load of nonsense with some “stats” in the middle trying to hold it together.
“TV is growing in 55+” well the funeral insurance clients will be happy.
TV boasts about building brand loyalty, well then maybe they should try and focus on the younger demo… you know, the demo that isn’t loyal to a brand yet…
*commissioned by ThinkTV
Are you kidding? You spend as much time trying to find something, than actually watching it! This is comical that you can’t navigate a very simple and intuitive UX, that has an absolute truckload of good content.
Netflix are becoming smarter about how they leverage our data and also recommend. I just finished Mindhunter S2 and received an email on the Monday with x6 new shows based off my historic viewing etc.
Once Disney+ launches I will subscribe, drop Stan and hold Netflix and probably get Kayo – all for two thirds of what I used to pay for Foxtel (around 3 years). Of course, I definitely still dip into traditional TV but 70-80% of my time spent is across the ad-free SVOD’s now.
They are far from dead.
Relative to revenue, the FTA networks have more debt than Netflix. Newscorp has run the high leverage model for years, this is really how media companies work now.
The main issue is content : Foxtel, Disney, CBS and the networks have gobbled up all the content for themselves. Why woudl 7/9/10 bother putting content on FTA when they can get people to pay for it on their internet channel ?
We can see the future, because its already happened in the US. The FTA networks will focus on the broadest audience with programs like song contests, talent programs, reality TV and the like and fill the gaps with old series and sports funded by the government.
Scripted programs and high value sports (football and tennis principally) will be quarantined off in pay TV.