Login is restricted to DCN Publisher Members. If you are a DCN Member and don't have an account, register here.

Digital Content Next


InContext / An inside look at the business of digital content

Stay the course

May 5, 2022 | By Jason Kint, CEO – DCN @jason_kint

Netflix’s earnings report last week sent a chill across nearly every company with a business model tied to a direct-to-consumer relationship. There are real concerns about the global economy and speculation about whether the  massive increase in streaming viewing habits seen during the pandemic will prove to be enduring. However, I wonder whether the insights gleaned from the Netflix situation are unique to Netflix and not a strong indicator for other media companies, most of which are just starting their streaming ventures.

First, let’s acknowledge the macroeconomy. Inflation registering over 8% will impact nearly every consumer market; this is especially true if inflation leads to higher interest rates and the dreaded “R” word. Unfortunately, this will be an ever-intensifying concern.

There has been a great awakening around the globe after two years of Covid, during which we had requirements and excuses to stay home and avoid socializing. There were countless stories in the trade and mainstream press as we witnessed streaming viewership’s outsized growth about isolation’s impact on our insatiable appetite for entertainment – escape. And binge-watching – which was already a trend after Netflix tossed a hand grenade into the linear schedule – only escalated during this period.

Certainly, Netflix finds itself with real competition for digital share of wallet for the first time in its history. Storied media companies have rolled out exclusive offerings that feature everything from hit television programs to blockbuster movie franchises: Batman, Star Trek, Yellowstone, Avengers from HBO Max, Paramount+, Peacock, Disney+, respectively. Many have regained rights to classic television hits that are endlessly bingeworthy.  Meanwhile, Netflix has increased its price, nearly doubling its monthly cost ($15.49 from $7.99 when it first launched) while cracking down on password-sharing as it, impressively, has saturated the market.

But while Netflix may have led the way in streaming, it may not be the best proxy for the subscription market opportunity. The company faces its own issues with stagnating growth and should not be mistaken for marketplace indicators. 

What is really happening

DCN’s 2021 research into the value of direct, trusted consumer relationships, brands as proxies for this trust, the needs and behaviors of Gen Z vs Gen Y, and the subscription market point to this lesson: Ignore Netflix and stay the course.

Most important are the lessons coming from studying the “next” generation. Consumer behavior is radically different in a world where payment and immediate gratification are merely a double tap of the thumb and face scan away on a mobile device. Paying for access to your favorite news or entertainment product, whether podcast, app or website, is no longer a foreign concept after hitting a “paywall.” Rather, it is little more than a friendly nudge along the way associating value with the products you love.

The number of people willing to pay for access to news and entertainment is increasing. In fact, Netflix’s greatest legacy for the market as a whole may have been leading the horse to the water. Netflix also worked with premium providers and helped build an appetite for great content and normalized paying for it.

What publishers seek

Now, distribution platforms from Apple to Google to Facebook are being pushed to finally act as true partners in driving subscription revenues and monetization for premium publishers. At times this nudge has had to come from regulatory threats in an effort to create more balanced bargaining power.

But what are publishers seeking? Publishers expect traffic to their owned and operated platforms and true ownership over the customer journey including the underlying transaction and customer data.

Publishers also want to take back control over the pricing, bundling, and messaging for their services from the distribution platforms. This allows a trusted publisher to extract and retain more subscription revenues by controlling their highly-valued brands and, importantly, the customer data from before, during, and after their subscription relationship. 

Putting things in perspective

For decades, the vast majority of digital content was available for free.

Meanwhile, Netflix built its business on spending (many would say excessively) on licensing and creating content. It helped rebuild the consumer appetite for quality content and experiences worth paying for. However, when we consider the implications of the company’s recent subscriber losses, we should not be so quick to predict a ripple effect across subscription-based businesses as a whole.

While a couple of news publishers, and a handful of other streamers count their subscribers in the tens of millions, the reality is that most publishers count theirs in the tens or hundreds of thousands. Thus, the basis for comparison with Netflix’s 220 million subscribers is specious at best. That’s like comparing a slowdown in Coca-Cola’s beverage sales to my kids’ driveway lemonade stand.

And the behavior of younger consumers points to a healthy appetite for great content and a willingness to pay for it. Now is not the time to panic, pivot, or radically shift your subscription strategy in Netflix’s wake. Instead, trust in the value of quality content well-delivered in trustworthy settings and know that audiences will be right there with you.

Liked this article?

Subscribe to the InContext newsletter to get insights like this delivered to your inbox every week.