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Is Netflix’s Risk Aversion Too Risky in the Long-Term?

In streaming’s nascent days, before everyone had a service and volume wasn’t the only viable content approach, there was Netflix doing something unique and risky once again.

The service introduced the world to Netflix original series House of Cards in February 2013, dropping the whole first season at once. It was the first major TV show to be streaming-exclusive, and the debut’s success ensured it wouldn’t be the last — for Netflix or any other media company for that matter.

Netflix has innovated since, rolled with the various punches thrown its way, and remained a streaming goliath in a sea of mostly “Davids” in the ongoing streaming wars. Yet, one very noticeable development in recent years is that the riskier approach that got it to this point in the game has seemingly gone by the wayside.

Now, that’s a natural part of the business life cycle, to be sure. In your plucky early days, you’re making noise and rolling the dice a bit more to make a splash in the market and prove to would-be (and existing) customers that you’re continually interesting because you offer something that your competitors don’t. When Netflix had few competitors, this stage of the game was easier, yet they took the risks anyway, to keep growing and ensure that the buzz would remain around them despite what used to be a handful of beloved originals that were dropped all at once so super-users could “binge” them all.

In the time since, Netflix has become a ubiquitous part of what streaming means to people. For many, it’s been a gateway to streaming, and the first step into the ecosystem that you never truly forget about. At the height of the pandemic last year, it seemed more popular than ever for a stretch. The culmination of what seemed like the “year of Netflix” was the surprise hit The Queen’s Gambit and user figures in the time since show a service not necessarily losing audience, but market share, at least, in large part due to the overall streaming growth Netflix itself has helped facilitate.

The focus on competition is a fair one, since there’s so much of it. But it’s also worth looking at what Netflix itself has been doing in recent years as traditional TV giants like Disney, ViacomCBS and NBCUniversal built up competitive services, while fellow tech innovators Apple and Amazon expanded their own capabilities for streaming content delivery as well.

And the answer is: Well, just “being Netflix.”

I don’t even mean that in a pejorative way toward the service. “Being Netflix” has been powerful stuff for a decade, and that can’t be ignored. However, the risks just aren’t there anymore in terms of content and decision-making around it. And even the hits like Queen’s Gambit or Bridgerton lose lustre pretty quickly due to the nature of an all-at-once season drop versus the serialized, TV-like content schedule that competitors have embraced to great effect by keeping buzz going for months.

While the impending arrival of Seinfeld to Netflix brings optimism for users staying on-app for longer, landing the classic sitcom doesn’t innovate. Its arrival comes out of necessity after Netflix lost both Friends and The Office in the matter of a year or so, along with a slew of other library content favorites that kept subscribers watching.

Further still, Seinfeld is a ready-baked success story for Netflix that requires no real effort to benefit from it. That’s similar, in many regards, to the recent “rescue” of Manifest, which only comes after Netflix had the data to prove people want to watch it given earlier seasons gaining a fan base on the platform. As was discussed on “The Watch” earlier this week, Netflix isn’t even throwing out liferafts like this much anymore. It waits and sees what works, and THEN it’ll spend money to support it.

Its own advertising is similar, as Netflix now plays wait-and-see on the shows people like before telling the masses about them. But with increased competition and just such a deluge of content at all times, it’s been tougher to find hits that are getting the full-court TV ad press.

Data from iSpot shows how Netflix has drawn back TV advertising in recent years to reflect this idea. For the full year of 2018, Netflix spent an estimated $98.7 million on national TV ads, then $91.1 million in 2019. In 2020, that number dropped to $62.6 million, and through Aug. 23 of this year, Netflix has spent just $20.6 million.

Netflix has been suffering from a lack of “hits” this year spurred in part by production issues that were not an issue when the service was cranking out content last summer. So that’s part of the lack of buzz we’re seeing. But maybe part of the issue too is that in a sea of video content both within and outside of Netflix’s walls, it’s just hard to find the sort of praise-worthy show that Netflix has excelled with in the past. This is especially problematic as Netflix’s investment in low-cost, high-watch-time reality TV proves itself out. The algorithm wants you to watch one thing, while the business potentially wants you to watch something else altogether. And without watching the would-be prestige show, it never gets advertising, so never really gets the viewership…

This is all changing soon, too. Or it should be. Starting in 2022, Netflix gets the exclusive post-theatrical window on all Sony films — something that should pay immediate dividends with a new Spider-Man movie coming out this December. While Spidey can clearly generate buzz on his own thanks to a 20-year history of cinematic success and Marvel fans, what of the rest of the Sony slate when it leaves the theater and moves to its extended (though temporary) stay on Netflix?

Given the binge nature of Netflix’s show drops, these marketing exercise have sort of been like movies, in the sense that you have a very limited time to capture the zeitgeist or else move on to the next endeavor. Unfortunately for Netflix, it hasn’t necessarily excelled in that regard of late, so one has to wonder if lessons are being filed away in advance of the coming Sony relationship, when the whole point would seemingly be to promote those movies heavily as a competitive advantage.

If we don’t see Netflix advertising these Sony films heavily in early 2022, though (especially in the case of Spider-Man given the guaranteed popularity of that film along with the uncertainty around box office returns given continued COVID questions), then one does have to ask what the point of all of this is.

Netflix is playing it safe, which can work from a business perspective for quite a while, especially when you’re a market leader. But at some point, Netflix is going to have to start taking some more risks, and gaming and social networks aren’t it.