HBO Max’s emphatic outperformance compared to Netflix is perhaps instructive, answering a question many have pondered this week – what’s going on with Netflix and why has it stopped growing?
To simply squawk that ‘content is king’ would be a lazy analysis, a kind of banal superficial commentary.
The thing about cliches though is they tend to ring true.
If you’re not familiar with HBO Max it is likely because it's not available directly in the UK and is instead built into Sky TV.
In the United States, HBO’s model is well established – launched in the seventies, it was the breakaway entertainment platform long before the internet, never mind streaming – and quite simple, it makes high quality ‘must see’ shows and, more recently as part of Warner, movies.
It’s the maker of the Sopranos, The Wire, Sex and the City, West Wing, Game of Thrones, Succession and x-rated DC Comics and Suicide Squad spin-off Peacemaker. HBO’s pedigree is big-budget A-list, largely uncensored and extremely popular shows.
Launched during the pandemic, the HBO Max streaming platform provided both binge-watchable back catalogues, new shows and, significantly, a route for Warner to pump its movie content into American homes whilst cinemas closed for the Covid lockdown – with the exclusive streaming release of Wonder Woman 84, Matrix Resurrections, and Dune.
Following in the soaring success of the Disney Plus streaming service, HBO Max has rapidly built a large subscriber base.
Some 3mln new subscribers were added in the first quarter of 2022, which makes 12.8mln new users over a rolling twelve-month period, taking the aggregate subscriber tally to 76.8mln.
At the same time, Netflix lost 200,000 subscribers in the first quarter coming in multiples beneath Wall Street expectations for 2.5mln additions. In total, Netflix ended the quarter with 221.6mln paying subscribers.
It triggered panic stations for investors, with US$50bn wiped off its value as Netflix stock slumped some 38% in reaction.
So, what’s happening here?
Has Netflix simply saturated its customer base and has now inevitably reached a phase of ex-growth – many in the market fear as much, whilst others suspect moves to crackdown on password sharing may only serve to disincentivise more of its subscriber base.
Price hikes similarly threaten to exacerbate and may see many more users reach for the unsubscribe button.
At the same time, HBO and most likely Disney Plus (we’ll find out more about that with its next earning report come May 11) are stacking up new subscribers to catch up and close the gap – perhaps they will also reach a saturation point.
Right now, however, HBO successfully growing its audience in tight times does otherwise tells its own story.
Unlike the expensive Netflix content strategy of throwing enough of everything at the wall so that enough sticks for enough people in enough places, HBO and Disney+ already own catalogues of existing and brand-new IP.
Each platform has decidedly fewer shows than Netflix, albeit less is often more in terms of quality and execution.
Netflix will in the coming weeks and months go to great lengths to reassure shareholders of some sort of rebooted growth story, one wonders whether a sharper focus on quality will be part of the plan.