The co-founder of Netflix and one of the company’s own faces, Reed Hastings, has resigned as CEO after 25 years with the company. He will continue as executive president, but says goodbye to the position of maximum responsibility having left an enormous legacy that not even the turmoil of the past year should tarnishturbulence that also, to a greater or lesser extent, have been common to the entire NASDAQ.
Of course, Hastings leaves his position right at the most complicated stage, due to the global economic context and the drums of recession that are getting closer and closer, and above all, because it is right now that Netflix is facing the most difficult decision of his story, in which a miscalculation could have tectonic consequences for the company.
A key quarter for the future of Netflix
In the quarterly results presentation, where Ted Sarandos and Greg Peters, the new co-CEO duo, did not reveal great details of the current biggest unknown (how is the new ad-supported plan going), there was room to talk about a movement that has already been announced by Netflix but it remains to be seen how it is executed, something that will be key in the consequences that it may have.
That movement is start really restricting the use of shared accounts by people living in different households. It has been a buzz for a long time, but for Netflix executives the time has come to face the decision.
It is complicated for several reasons, starting because for years it was Netflix itself that encouraged doing so, flaunting it as a marketing claim. Each company adopts a role and a culture to establish in our minds the image we have of it. Netflix opted to be open, casual and friendly to the extreme, despite the fact that its conditions of use did not say exactly that: they already warned that sharing an account was something reserved for people who shared an address. Then the world was filled with friends, non-nuclear families, long-distance couples and paddle tennis partners doing bizums to pay their fee.
Netflix has turned against its friendly encouragement that we share our account, to the point that its withdrawal may mark the future of the company
The next problem is that the figures do not smile at you. Netflix is, at least in Spain, the most shared video-on-demand service: more than 60% of users access it through a shared account. And what’s worse: two out of three users would give up that service if these shared accounts were no longer allowed. Something that is going to happen.
Sarandos and Peters have already anticipated that it will be a painful move. “It will not be a universally popular movement” or “there will be a cancellation reaction” have been some of the phrases with which they have begun to grit their teeth. They also used a mild-mannered metaphor to avoid giving specific details of the process: “it will be a gentle nudge” for users to open (and pay for) their own account.
Hastings has left the ground fertile for when the day comes to push the red button, but you won’t have to deal directly with its consequences, at least not from the position of CEO. The transfer of profiles or the most affordable plan with advertising are the subscription of these last months. We will see the consequences shortly.
But it would be unfair to be left in shock at a critical moment when that same CEO has been partly the one who raised Netflix from scratch with an innovative business, stamping DVDs and sending them all over the country, and knew how to reinvent itself when DVD was It put on a VHS face until it became one of the great technology companies in the world. It even achieved metonymy, the informal thermometer of the success of an innovative company: how many times have you heard another company present itself as ‘the Netflix of’? “The Netflix of documentaries”, “the Netflix of books”, “the Netflix of audiobooks”. That is an intangible success that few companies achieve: Uber, Airbnb or Spotify have also achieved it.
Beyond the intangibles, there are the pure and hard figures. If someone only looks at the last year, they can get a bittersweet taste. If you instead look at the big picture and the long-term evolution, the legacy is undeniable.
2022 ended better than expected, even allowing a slight growth compared to the figures for 2021, but the first semester did not seem to show signs of that final upturn: it was a spring to forget. Of course, the last quarter of 2022 left operating income weaker than the previous ones, so for the first time in seven years, Netflix ended a year below the previous one in that sense.
On the floor, that semester meant the destruction of more than 70% of Netflix’s market capitalization. It is as true that the fall was widespread for the technology sector as that other companies had much softer falls.
In any case, Netflix hit lows just before the summer and has grown 90% since then. The problem is that even so and everything is still below half of its maximum, which was close to 700 dollars. on a Halloween where the real scares began.
What’s next? tectonic movement. The one that will mark the future of Netflix based on the amount of net highs they can achieve. Or rather: if banning shared accounts between people from different addresses really pays off, at least in the medium term, or if instead the user drain will leave a hole that is difficult to mend.
Featured image: Wikimedia Commons, own illustration.
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