It's easy to be down on Netflix (NFLX 0.10%) these days. The world's leading premium streaming service has plummeted in back-to-back quarters on the heels of disappointing financial results. Even after a healthy bounce on Friday, the stock enters this new week a whopping 73% below last year's all-time high.
Netflix now finds itself doing a lot of things that it hasn't done in the past. It's easy to dismiss some of these moves as desperate during a sell-off, but take a closer look and most of them make a lot of sense. You may not recognize Netflix a year from now -- and that's not necessarily a bad thing.
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Channel surfing until something clicks
A couple of interesting developments surfaced over the weekend. Deadline is reporting that Netflix is considering live programming for some of its unscripted shows, stand-up specials, and competitions. Subscribers would naturally be able to catch the shows later -- on their terms -- but live streaming would add a new layer of excitement. It would also allow for live voting for talent shows and other competition events.
The move makes sense. It was six years ago that Netflix turned heads by introducing Chelsea, its first stab at a late-night show. However, the show starring E! star Chelsea Handler was prerecorded hours before going on the air. It was canceled a year later.
The shift to live programming doesn't mean that Netflix will be throwing big bucks at sporting events. It also doesn't mean that Netflix is straying from its "binge" approach. The shows would run live for those craving something fresh and potentially interactive, but the content can continue to have a long shelf life beyond that.
NASDAQ: NFLX
Key Data Points
Another interesting development over the weekend is Bloomberg reporting that Netflix is talking to theater chains about making its higher-profile upcoming movies available on the big screen. The content is more compelling than you might think, as Netflix is set to release the sequel to sleeper hit Knives Out later this year.
Two potential candidates for theatrical release are the sequel to Knives Out and a new movie from Birdman and The Revenant director Alejandro González Iñárritu. The rub for Netflix is that if it wants mainstream theatrical distribution it will likely have to abide by multiplex requests that they have exclusivity for 30, 45, or 60 days. This is the kind of move that Netflix would've balked at when it was on top of the world, but a more humble Netflix realizes that it can generate a new revenue stream by stretching out the release timeline of its films.
There are also older tidbits on platform developments that should be coming to life soon. Netflix announced last year that it intends to enter the gaming market in 2022. It has been scooping up indie developers ahead of that move. Netflix also reiterated plans last month to roll out a cheaper ad-supported version of its streaming service. Just as HBO Max introduced a $9.99 ad-supported monthly plan last year as an option for folks looking for cheaper access than the original $14.99-a-month plan, introducing access at a lower price point should help woo back viewers who have nixed the service after seeing it nearly double its rate after six price hikes over the past eight years.
Not every new move will be a winner. Folks aren't really heading out to the multiplex these days unless it's a big-budget superhero flick. Year-to-date domestic box office receipts are still 42% below where they were at this point in 2019. Adding an ad-supported tier could eat into the prestige of Netflix. However, it's hard to argue about the logic of embracing gaming and live content. The moves will increase engagement and likely lower churn.
Netflix was cocky, and there was a price to pay for that confidence. It's the only major premium streaming service to lose subscribers sequentially in its latest quarter. Now that the platform has been humbled, it's more willing to try new things, and that's an easy strategic shift to appreciate. If Netflix wants to remain the top dog among streaming services stocks, it will need to try new things -- and that's exactly what the service provider is doing right now.
