The future of Netflix – what’s really on the cards?

The Office US and Friends might be more than 14 and 24 years old respectively, but they are still a huge draw for many Netflix users – data from 2018 revealed that the former was the most-streamed show on the platform.

So there was mass hysteria recently when it looked like we might lose both of them.

NBCUniversal is launching its own streaming platform, according to The Wall Street Journal, which means that The Office, as one of its crown jewels, is unlikely to remain in the hands of a competitor.

In a statement, NBCUniversal said that it had “begun internal discussions about removing The Office from Netflix”, and while the deal between the two is in place until 2021, there is a high chance that the sitcom will be taken off the Netflix table following that date.

Friends belongs to AT&T, the world’s largest telecommunications company, which also owns WarnerMedia (formerly Timer Warner), and comprises HBO, Turner and Warner Bros.

It has also made the decision, like every man and his dog, to launch its own streaming platform.

“Today we announced plans to launch a new direct-to-consumer streaming service in the fourth quarter of 2019,” said WarnerMedia CEO John Stankey during a presentation in New York – the “beta version of the service will not have original content on it, but you’ll see that in 2020 and then ramping up”.

At the 2019 TCA winter press tour, Kevin Reilly, chief creative officer for WarnerMedia’s Direct-to-Consumer division, addressed the concern surrounding Friends. No concrete answer was given about the show’s future, but it’s not sounding particularly positive for Netflix.

“There is no piece of content in the Warner catalogue that will not be looked at for the service,” he said.

Reilly also added that “for the most part sharing destination assets is not a good model and should be exclusive to the new service”.

But like The Office, nothing is leaving just yet – the sitcom will remain on the platform”throughout 2019″, Netflix coughing up around $100 million to keep it on its books.

The CW is also partly owned by AT&T, along with CBS, and that contract is up this spring. That means the likes of Riverdale, Arrow, The Flash, Supergirl, DC’s Legends of Tomorrow, and Black Lightning could all be on their merry way and potentially find a home on DC Universe which, as stated previously, belongs to WarnerMedia.

Price hikes

According to reports, Netflix in the US has increased its prices four times thus far, which means it’s happening around every other year on average – and this year in the US, prices have climbed from $11 to $13 per month. That’s the biggest increase yet.

This, as with everything, is likely to keep on happening because, first, inflation happens, and second, it’s one of the easiest ways for the company to raise funds, especially now that it is sinking all of its efforts into creating more original content. The platform operates on a “cost-plus” model. That means that it covers all of the production costs, and offers around 30% extra on top of that to own most of the licensing rights.

Also, over at Netflix more money goes out than comes in – it had a negative free cashflow of $2 billion last year, and that figure is predicted to rise to $3 billion this year – which is no surprise when you consider that it has committed to spending $18.6 billion on content.

The production line is expanding and it looks set to continue at a similar pace, so don’t expect this to be the last of those increases.

Clamping down on password sharing

Netflix CEO Reed Hastings previously said: “We love people sharing Netflix. That’s a positive thing, not a negative thing.”

HBO CEO Richard Plepler also echoed that sentiment: “It’s not that we’re ignoring it, and we’re looking at different ways to affect password sharing. I’m simply telling you: it’s not a fundamental problem.”

Both of them believe that ideally, if someone is accessing Netflix or HBO and experiencing all it has to offer, eventually they will commit to a membership and pay the subscription fee.

But according to reports, if that shift isn’t happening, that’s an expensive problem for streaming services.

“The cat is out of the bag,” said Jill Rosengard Hill, executive president at research-based strategic consulting company Magid when speaking to CNBC.

“I wish I had a solution, because it’s really hurting the business model and monetisation of these premium high-value services.”

According to Magid’s data, 35% of millennials share passwords for streaming services, which equals a lot of untapped financial dividends. They also found that “post-millennials” – users who are around 21 years or younger – are sharing passwords at a rate of 42%.

But while Netflix is missing out on significant financial gains, it has yet to discuss what its plans are for dealing with said problem, or if it’s going to be something that it even pursues at all.

“As we move away from an advertising-only revenue model towards people paying for subscriptions more, it has to carry with it the rise of sharing,” Daniel McCarthy, a marketing professor at Emory University, told CNBC.

Watch this space. (Or wait for the algorithm to remind you of it.)

View the original post on Digital Spy.