Netflix addresses a subscription shake-up that could reshape how you stream

Netflix is up to something. Not content with being the world’s biggest streaming service, they’re apparently doing a bit of shopping, and rumour has it they’ve got their eye on buying Letterboxd—the film-lover’s social network that, depending on who you ask, is either the best thing to happen to cinephiles or where people go to get snarky about second acts. Letterboxd has 30 million users and all the critical clout that comes with it, so whoever snaps it up could get themselves a ready-made hub for tastemakers and obsessive list-makers alike. And yes, Netflix is competing with other mystery companies for it, because of course they are.

Netflix Sizing Up the Market (and Taking a Few Hits)

All this comes at a bit of a weird time for the streaming giant. For one thing, there’s been a lot of noise about how second seasons of their shows just aren’t performing like they used to; apparently, the 'difficult second album' problem happens in binge TV as well. Add to that the eight percent drop in Netflix’s stock, and you start to see why the higher-ups are looking for a bold move—or at least a flashy distraction.

Financially, they're fine—profits are actually up—but in this business, ‘more money’ doesn’t really impress people who are fixated on never-ending subscriber growth. When earnings came out this week, Wall Street basically shrugged, because the viewer numbers didn’t keep pace with the profit chart. There’s a lot of chat in these circles about how everyone cares more about who’s logging in than how much cash is coming in. It would be very silly, but then again, that’s Wall Street for you.

Clamping Down on the Numbers

With all eyes on the growth metrics, Netflix has made a move that’s sure to grind some analysts’ gears: they’re not releasing regular streaming numbers anymore. Instead, they’ll give us all a big annual number dump. Less ammo for pundits to pick over, more ambiguity for everyone else.

Will Netflix Go Free?

Now, here’s where things get interesting. There’s talk that Netflix has been mulling over a proper free, ad-supported tier—think old-school telly channels, but inside your Netflix app. It's not so far-fetched; Tubi and Roku have done well with that setup, grabbing between 2.3 and 3 percent of all telly viewing back in April. Even Fox is in the mix, reportedly sniffing around to buy Roku for themselves. Anyone who remembers how cable telly worked in the UK (or Freeview) gets the vibe.

Netflix, though, seems reluctant. Co-CEO Greg Peters tried to manage expectations during a recent earnings call, saying:

'A free offering could make sense in some markets, but we have to be thoughtful about cannibalisation of paid tiers.'

Translation: if we make something free, we’re worried the people paying now will just ditch their subscriptions and move to the cheaper option. Peters went on (and on) about making sure the offering is special enough to stand out, and that the advertising operation in any country where they might go free would need to be absolutely nailed down for it to make financial sense.

'We’ve got to ensure that we’ve got the right offering, the right differentiation of that offering. It’s probably also worth noting that having an effective scaled ads business in any candidate country for such an offering is clearly an important enabling factor to make those economics work. So that’s all to say that free is something that we’re going to continue to consider, but we have no near-term plans to launch something.'

So, you’re not getting a free Netflix subscription any time soon, but, as Peters puts it, accessibility's still the goal. They want to reach more people, just without shooting themselves in the foot on paid sign-ups. In the meantime, everyone else—from Fox to whichever company fancies Letterboxd—is playing a never-ending game of asset-swapping, trying to buy the next thing that might matter.

The State of Streaming Right Now

• Netflix’s profits are up, but actual viewership growth has stalled—hence the nervousness.
• Second seasons, historically strong for drawing in subscribers, aren’t performing well.
• Stock price has tumbled by eight percent.
• No more regular streaming statistics updates—just yearly reports from now on.
• Talk of a free ad-supported tier, but nothing happening soon (unless Netflix gets very bold, very fast).
• Tubi and Roku (the latter possibly being sold to Fox) are leading on the free streaming side.
• The Paramount-Warner Bros. merger is getting tied up in court battles.
• Letterboxd, social home of film buffs, is Netflix’s latest acquisition target—but they’re not alone in the chase.

If you were wondering, Netflix started out as a DVD rental outfit back in the late '90s—yes, through the post, actual discs—before flipping to streaming in 2007. These days, it’s global, in more than 190 countries, serving up all the original series, films, and documentaries anyone could (possibly) want. The game now is all about finding the next edge before someone else does.