Netflix (NFLX) enjoyed a huge first-mover advantage in the streaming space. First, it was the only player licensing archival content at a time when few rights holders fully understood their value. That gave the company early access to hit movies and television shows at low prices because nobody else was actually bidding.
The streaming giant also had an edge in being the first digital player to pivot to originals. That gave it an edge in recruiting talent and creating buzz-worthy shows.
Those advantages allowed Netflix to amass roughly 224 million subscribers around the world, but the company has largely squandered its advantages, allowing Walt Disney (DIS) to become a major rival while opening the door for Amazon (AMZN) to become a player in the prestige game.
It's not that Netflix could have kept Disney from being successful. The Mouse House simply owns too much good content for it to not succeed, but the incumbent leader has made a lot of poor moves since Disney+ launched.
Now, Netflix needs to make some major changes or it's going to move in the wrong direction when it comes to subscribers. The company can right its ship, but doing so will require making some tough decisions that the company has so far not been willing to make.
Netflix
Netflix Needs to Make Better Content and Be a Prestige Player
Every show Disney makes has a clear audience and a logical business plan. The Mouse House knows that "Ms. Marvel" won't reach the same audience as "The Falcon and the Winter Soldier," but it understands that the smaller show helps the company lock in young adults who drive their future business.
Amazon does not have Disney's intellectual property (IP) strength but it has been very careful to license big names and make its shows feel like major prestige plays. The company made a big splash with its "Rings of Power" series and it has acquired the MGM catalog which gives it rights to James Bond as well as some successful television shows (as well as other archival content).
Netflix started as a prestige play where most of its releases seemed like a big deal. It has clearly dropped that to focus on its algorithm and that leads to movies like "Red Notice," which starred Dwayne "The Rock" Johnson, Ryan Reynolds, and Gal Gadot in a film designed to be a franchise that nobody actually connected with.
Subscribers may have watched it -- they also watch "Bright" with Will Smith and countless terrible Adam Sandler movies -- but those films don't garner buzz, get people excited, or create excitement about the service. Netflix needs less content, but what it produces has to be much better.
Netflix Needs to Change Its Release Schedule
Netflix created the idea of binge-watching by releasing full seasons of its shows all at once. That model worked when it had no rivals, but now that it's dealing with multiple competitors for eyeballs, it no longer makes sense.
Disney shows are released one episode at a time. That allows media to cover every episode like an event while viewers know when they can talk about each episode with friends and colleagues. That's a huge advantage that Netflix willingly gives away simply because it believes its subscribers like the current model.
They probably do, but that does not benefit the company. When you have lesser-known (or completely unknown) IP, it takes time to build an audience. Netflix shoots itself in the foot when it comes to doing that with its current release schedule.
Yes, some subscribers would complain because they want to watch "Stranger Things" or the next season of "Ozark" all in one weekend, but that's not how people traditionally consume content. Netflix has been very stubborn on this, but its success depends upon making this change.
Netflix Needs Live Sports
Amazon and Apple (AAPL) have dipped their toes into live sports with "Thursday Night Football" and Major League Baseball respectively. Comcast's (CMCSA) Peacock has Premier League soccer while Alphabet's (GOOG) YouTube has made a deal for NFL Sunday Ticket.
Netflix has stayed out of the live sports space and that's a mistake. Sports are appointment viewing -- really the last appointment viewing left. Disney has built ESPN+ on the back of being the home for UFC Pay Per Views. People have to subscribe if they want to pay extra for that content.
While bidding on an NBA package or even the NFL may be unlikely (but not impossible) for Netflix, it could make a play for UFC, WWE, or AEW, the major pro wrestling groups which have worldwide followings and devoted audiences (and deals coming up relatively soon).
Netflix may choose to play in the margins in live sports, avoiding the huge cost for the NFL or the NBA, but anything else should be under discussion because sports fans have shown that they will follow their teams wherever their rights go.
