Is Netflix failing?

Okay, the news is not new actually that Netflix’s Q2 report was released almost two weeks ago. This report was not very impressive at all that the performance did not beat the expectation and the subscription number in the US dropped and the worldwide subscription additions were significantly behind the forecast. Why was the performance this bad? Netflix gave its explanations that it believed the bad performance was caused by the price change and the quality of its contents.

Based on the results of the Emmy Award, HBO won more awards than Netflix. This result could potentially show that the Netflix contents may not be as competitive as previously. This does not necessarily mean that the contents of Netflix are no longer good, it means there are more competitions in this industry. Moreover, more and more companies are joining in content creation, including Apple and Alphabet. Why is content creation so hot? It is because good contents can make profits and more crucially can help their customers stick to their products.

Then when there are more platforms and more good contents across various platforms, consumers gain more power and have more options. Under such circumstance, it is not wise for Netflix to raise its subscription fee. When the users continuously pay a certain level of subscription fees, they get used to this and stick to this plan without second thoughts after they initially made the decisions to pay the subscription; however, once they face a price change, they need to make the purchase decision again and realise there are so many options out there, then it is likely for them to switch to something they think is equally good but cheaper.

Therefore, I think that pricing may be a bigger problem for Netflix than as Netflix claims the contents are a bigger issue. When the competition for content creation is rising, increasing prices can affect current users’ loyalty, which should not be something that a firm wants to see.