In just a few years, the streaming industry has gone from virtually no competition to dozens of new platforms. Specific genres have been a motivating factor for the founding of multiple streaming services. Netflix (NFLX -0.57%) is one of the only platforms not to have a strong identity in the market. Here's why it needs to develop a more defined identity to stay competitive.
Identity is key
When Netflix ventured into streaming in 2007, it succeeded as a content aggregator that provided exclusive access to thousands of licensed movies and shows. As one of the only streaming platforms, Netflix thrived on offering as many genres as possible. However, new services such as Disney+, HBO Max, and Peacock have massively altered the industry. While Netflix's loss of 970,000 subscribers in the second quarter of 2022 is an improvement from the projection of 2 million losses, the company still has a long way to go and should be taking notes from its competitors.
Besides Netflix, many streaming giants are flourishing by presenting a clear identity to consumers. For example, Disney+ caters to those looking for Marvel, Star Wars, and family programming. Peacock has found its footing by being the home of comedy with mega-hits like The Office, Parks and Recreation, and Saturday Night Live. Even HBO Max has thrived as the home of quality dramas and DC content. Meanwhile, Netflix has spent years building its content library by filling it with as many different genres as possible. As a result, it's become a jack of all trades and, unfortunately, a master of none.
The introduction of new streaming platforms has seen Netflix lose its top-performing shows three years in a row as licensing deals end. Friends moved to HBO Max in 2020, The Office to Peacock in 2021, and Criminal Minds to Paramount+ in June. As Netflix Originals become an integral part of the company's business and future, providing content focused on more distinct genres will give subscribers more reason to stay.
Niche genres drive subscriber retention
From 2020 to 2021, Netflix's market share decreased from 25% to 23% -- the only streaming service to lose market share. In the same time frame, HBO Max went from 12% to 14% market share, Disney+ retained its 13%, and Paramount+ went from 3% to 4%. While Peacock's market share wasn't reported, it did gain 3.5 million new subscribers in Q1 2022.Each of these Netflix competitors offers a wealth of content in a specific genre, promoting subscriber retention.
Disney+ has amassed almost 130 million subscribers since its launch in November 2019, with not only several hits, but also a continuous supply of new content in the same genre. The Disney (DIS -2.11%) streaming service has stuck to a release schedule that offers a new Marvel or Star Wars original series almost monthly, leaving little time for members to drop the service between releases. Meanwhile, by the end of April, 23% of Americans who had signed up for Netflix had quit the service within a month -- making it the platform that subscribers are most likely to drop in the first month.
The company's low retention rate stems from consumers signing up to binge their favorite show and not having an incentive to stay. Netflix combated this by releasing the newest Stranger Things season in two parts, but that isn't a long-term solution. The most popular Netflix series of the last two years have been the horror drama Stranger Things, the Korean survival-mystery Squid Game, and the romantic regency-era-themed Bridgerton. The eclectic variety of series leaves subscribers nowhere to turn once they've finished their favorite show.
Alternatively, when fans complete Game of Thrones on HBO Max, they can start the historical drama Rome while they wait for the show's spin-off, House of the Dragon, to come in August. Comedy fans can finish The Office on Peacock and immediately dive into similar workplace comedies like Parks and Recreation or Brooklyn 99. Even sci-fi enthusiasts can complete Star Trek on Paramount+ and try out its recently released Halo show.
Not all hope is lost
As licensing agreements continue to end and Netflix Originals become a larger part of the platform's content, the company has a chance to focus its coming releases on a specific niche. Its hit, Stranger Things, was a key driving force in curbing subscriber losses in Q2 2022 and the show's creators have already announced a spin-off in the works as well as a project based on a Stephen King novel. There's potential there for Netflix to draw in fans of horror, focusing on retaining Stranger Thing's massive fan base.
Additionally, the company launched Netflix Games in November 2021 and has since announced multiple game-adapted series. The streamer has already had success with The Witcher and has an Assassin's Creed show in the works. If its coming series perform well, Netflix could be a haven for horror and game enthusiasts everywhere, adding value to its subscription and giving members a reason to stay.