The world’s biggest streaming service, Netflix, recently passed a major milestone. On Tuesday, the company released an earnings report which noted that it has surpassed 200 million subscribers. That figure was bolstered by a record-breaking 2020 as people sought ways to stay entertained throughout the COVID-19 pandemic.
Now, Netflix enters 2021 with a host of challenges ahead of it. The streaming service faces challenges from countless rival platforms that aim to lure away its fanbase.
Meanwhile, the streaming industry as a whole is dealing with the issue of “churn” as consumers bail on their monthly subscriptions after watching what they want on each platform. It will be interesting to see how Netflix and others in the space handle this growing trend in 2021 and beyond.
For the moment, however, Netflix is able to enjoy a moment in the spotlight. Hitting the 200 million subscriber mark cements its status as the top streaming service in the world—something that is unlikely to change in the near future.
Netflix is King
As noted, the pandemic influenced Netflix’s highly successful 2020. Still, the streaming giant didn’t succeed because of the pandemic alone. It also released a ton of new content that was generally well-received by its subscribers.
The company notes that it brought in a total of 37 million new paying subscribers throughout the year. Roughly 8.5 million of them signed up during the fourth quarter. Netflix now has 203.6 million subscribers around the world. Those people helped the company bring in $25 billion in annual revenue during 2020.
It should come as no surprise that last year’s Q1 was the best frame for Netflix. Since it mostly captured the early days of the pandemic and its associated lockdowns, the streaming service attracted 15.8 million subscribers in that period. The third quarter was a bit of a letdown, but Netflix rebounded nicely in Q4 thanks to a slew of new programming.
Its chess-focused limited series “The Queen’s Gambit” was watched by more than 62 million households in its first four weeks. That was enough to make it the second most-watched limited series on the platform behind “Tiger King.”
Netflix also found a hit with “Bridgerton,” which garnered 63 million household views while George Clooney’s “The Midnight Sky” reached 72 million households.
Meanwhile, new seasons of fan-favorite shows like “The Crown” helped Netflix retain and attract subscribers in the closing days of 2020.
Keeping it Rolling
For Netflix, the best way to maintain its subscriber numbers is to keep producing hit content. That isn’t as easy as it sounds—and it doesn’t sound easy to start with. Even so, the platform is urging users to stick around for the slate of new programming it has to share in 2021.
In the wake of a price increase at the end of 2020, Netflix announced that it will be releasing a new movie every week moving forward. That’s an insane pace that will test the company’s production chops but should keep subscribers happy.
Meanwhile, the company has several seasons of both new and returning shows arriving in 2021. One of the most highly anticipated is season two of “The Witcher,” though it likely won’t arrive until later in the year (or even early 2022 if it gets delayed again). The next season of “Umbrella Academy” and the debut of “Shadow and Bone” will also arrive this year.
Even so, Netflix has some big competition. The likes of HBO Max and Disney+ also plan to roll out highly anticipated content this year that could force consumers to choose which service to send their monthly payment to.
The latter’s slate of programming is extremely enticing. Disney+ plans to debut “The Falcon and the Winter Soldier,” “Loki, “Ms. Marvel,” “Hawkeye,” and the third season of “The Mandalorian.”
HBO Max, meanwhile, will stream all of WarnerMedia’s blockbuster films the same day they release in theaters at no extra cost.
Beware of a Slowdown
Although 2020 was a booming year for Netflix, the company warns that 2021 won’t produce the same impressive numbers. The platform currently projects that it will add around six million new subscribers in Q1. That’s a significant drop from what it did last quarter as well as what it did at this time a year ago.
Netflix’s co-CEO Reed Hastings warned that the pulldown effect will keep the company’s subscriber numbers mellow in 2021. Since so many people signed up at once in 2020, there are now fewer new users to attract. Current users that end their subscriptions also detract from Netflix’s “net” subscriber growth.
So, Netflix is focusing on what it can control. In its statement to shareholders, the company said, “Our strategy is simple: if we can continue to improve Netflix every day to better delight our members, we can be their first choice for streaming entertainment.”
If there’s one bright spot, it is the fact that Netflix’s internal revenue (finally) seems to be sustaining it. The company told shareholders “we no longer have a need to raise external financing for our day-to-day operations.”
That’s a big deal for Netflix as it aims to produce a great deal of content each year.
Aside from its competition with other streaming services, Netflix is also battling the problem of churn. This happens when people sign up, watch a few movies or shows, and then end their subscription after one or two months. Since streaming services are extremely easy to sign up for and cancel, this is a growing problem for the industry.
An October survey conducted by Deloitte found that 46 percent of respondents canceled at least one of their streaming subscriptions in the past six months. Of those people, 62 percent did so because they finished the show or movie they were watching.
Given the fact that there are now countless streaming services to choose from, consumers are more likely to bounce from one to another rather than signing up for all of them at once.
At this point, it’s unclear how the industry will solve this problem. As new platforms enter the fray seemingly every day, it is only getting worse.
Perhaps the best thing to do is take Netflix’s approach and focus on rapidly pumping out high-quality content. That could keep subscribers engaged enough to prevent them from canceling. However, only time will tell if this is an effective solution.
In the meantime, consumers need to get creative with how they binge content unless they want to drain their wallets each month by paying for five different services.