Netflix has turned a cemetery into a series

The streaming service is a prolific producer of quality series, but is in a hurry to cancel them after two seasons for financial reasons. Netflix’s business model concentrates on recruiting new subscribers, ignores the content and forgets the fans

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It has already become a regular practice For Netflix subscribers. Shortly after the streaming service uploads a new season of a beloved series, legions of fans are on the edge of their seats, ready for a decision: will the series be renewed for another season or will it be canceled. Every quarter a new community of disappointed people is created, in recent weeks it was a particularly united group of fans of the fantasy series “Warrior Nun”. Her friends called on the various social networks to run an endless loop watching the series to increase the number of expectations accumulated in it, and rated it positively on every possible site. The efforts bore some fruit: the second season became one of the ten most watched on the platform, and the series received the highest viewer rating in the history of Netflix’s original series. But the fruit was unripe, Netflix announced the cancellation of the series about two weeks ago.

“Warrior Nun” is just the latest victim of Netflix, which usually cancels series wholesale, And already today she is responsible for one of the largest cemeteries of young original series. It’s not just a feeling that the lifespan of the series on Netflix is ​​significantly shorter than other companies. According to a 2020 study by Amper, the lifespan of an original series on streaming services is two seasons, compared to an average of four seasons on cable companies and six and a half seasons on broadcast networks. Netflix was responsible for 68% of all cancellations on streaming services. Why does Netflix cancel so many original productions, when does it decide to cancel, do others learn from it, and what does all this say about the change that the television industry is undergoing? Lament of fans.

1. The strategy has become expensive

in the last decade Netflix has changed the television industry. The company well recognized technological processes and was the first to really establish a popular service for streaming content on the Internet in high quality (in technical and content terms). Historically, when talking about Netflix and similar services, it is customary to refer to the market as “cutting cables”, the phrase is intended to describe the tangible way of disconnecting from television services, but the attitude is also metaphorical: towards viewing services that are not limited and restrictive, not only on cables and wires, but also on channels, Broadcast schedule, advertisers and commercial breaks. The viewer’s freedom of choice is absolute, the interruption is zero and the wait is minimal. But this dimension of innovation and success has also become Netflix’s biggest challenge.

Cable channels and production companies used to rely on ratings and selling advertisements to generate profits, today the business model is subscriptions and many new contents as a tool to recruit new viewers. Accordingly, between 2016 and 2022, Netflix’s spending on productions tripled to approximately 18 billion dollars. Original productions were her way of enriching her product with exclusive content. The impossible amount of content that Netflix has curated has been a winning strategy for a long time.

But in recent years, more and more companies have entered the market and created fierce competition. In just the last year, Netflix’s stock has fallen by about 50%, not least due to the fierce competition against the competing and young services Disney Plus, HBO Max as well as AppleTV.

This is how Netflix found itself in a complex situation. On the one hand, it established an image for itself as a company that invests capital in original productions that (detached from the shackles of tradition) raise all at once, a necessary strategy for it to remain relevant in a competitive market. On the other hand, this is an expensive strategy: it is not possible to significantly increase the number of new series and also renew existing series.

The question on Netflix of whether or not to renew a show does not revolve—as intuition might dictate—only around the question of whether a lot of people watched the show. Netflix also cancels series with many loyal fans. So what is happening? Little known, Netflix keeps its decision-making process completely opaque. The closest thing to disclosure about this process was in a Bloomberg publication from 2021 that cited an internal company report according to which Netflix uses a series of metrics such as “adjusted viewing share”, “impact value” and “efficiency score”.

2. The only consideration: new subscribers

Although it is not really known how all these indicators are compiled, Netflix itself admitted to the British regulator that it examines two time events in relation to the content it uploads: the first seven days and after the first 28 days, and distinguishes between two types of viewers: “beginners” (who watch the first episode) versus the “Completing” (who watch at least 90% of the series). These are joined by a third measure of the total number of subscribers who watched the show.

I mean, it didn’t really change that the fans of “Warrior Nun” continued to watch the series again and again. Netflix doesn’t care. What she cares about is whether, by weighing the various indicators, the series can bring her new subscribers and how many, and whether it pays for her compared to the cost of production.

The production cost point is important. First because it is unusually high on Netflix, which, unlike traditional television, alone bears the entire cost of production (plus a 30% premium). In exchange for upfront payments, the outside studios give up the potential profits that come with owning a long-running successful series. Second, because Netflix is ​​trying to attract productions and creators to it by promising to raise their wages significantly the more seasons the series lasts. This is the reason why many series are canceled on Netflix after two seasons, the third season is significantly more expensive than the first and it is simply more economical to produce a new series than to renew a “liked” series for a third season.

In all this dynamic and Netflix’s business model (in regards to original productions) there is something that seems almost counterintuitive. On the one hand, Netflix operates based on the belief that creating new content is the right way to attract new subscribers, and therefore uses a business strategy whose center is not “retaining” existing subscribers, but is aimed at offering a large amount of content for binge viewing that changes rapidly all the time in order to attract new subscribers. On the other hand, Netflix began to gain dominance in the streaming market after acquiring huge content libraries with particularly popular titles. For example, she was willing to pay 100 million dollars to hold the right to syndication of “Friends”, 14 years after the series went off the air. This means that Netflix understands the importance of favorite content. But beloved content is built over time, and series that are very successful would not always be so successful after two seasons. What is the solution? Not clear at the moment. As competition from other streaming services intensifies, it is not unlikely that Netflix will reassess whether its strategy is still winning. In the meantime, mostly losers are registered, of content and fans.