Netflix's Rise: Hollywood has struggled in recent years, but Netflix has flourished, achieving a peak stock price while traditional studios face challenges. The rise of streaming, especially during COVID, showcases Netflix's dominance, though new competition poses future challenges for its leadership in entertainment.
In recent years, Hollywood has faced significant challenges, including strikes by writers and actors and a decline in movie theater attendance, resulting in over 2,000 lost screens since the pandemic began. Despite this turmoil, Netflix has thrived, reaching an all-time high stock price and outpacing traditional studios. Initially seen as a risky startup in the mid-2010s, Netflix capitalized on changes in consumer behavior, particularly during COVID when viewers turned to streaming. This shift led to a surge in Netflix's popularity as traditional companies struggled to keep up. However, as competition increases from legacy studios launching their own streaming services, Netflix's current success raises questions about its long-term impact on the entertainment industry and how competitors will adapt.
Streaming Setbacks: Netflix lost subscribers for the first time in over a decade in 2022, prompting it to introduce an ad-supported model and restrict password sharing as competition in streaming increases, highlighting the need for businesses to adapt to market changes.
Disney and other companies jumped into the streaming market, especially after the COVID-19 pandemic, taking advantage of low interest rates and investor enthusiasm. However, Netflix faced a setback in 2022, losing subscribers for the first time in over a decade. This decline made investors wary of companies that were losing money. Netflix's executives acknowledged increasing competition and announced plans to launch an ad-supported subscription model while cracking down on password sharing. This shift indicates that streaming services must adapt to changing market conditions to sustain growth and profitability.
Netflix's Strategic Shift: Netflix's strategy of enforcing password sharing and introducing ads surprised many but resulted in significant subscriber growth. They also limited their content budget to $17 billion, showing a new focus on sustainable spending.
Netflix decided to make significant changes by cracking down on password sharing and introducing ads, despite previously stating they wouldn't. Many analysts thought this would lead to subscriber losses, but the opposite happened. Their subscriber growth surged after implementing these changes. They also announced a cap on their original content budget at $17 billion, indicating a more cautious approach to spending on high-profile talent. This strategy reflects a shift in Netflix's business model, embracing new methods while still focusing on maintaining a sustainable budget for content creation. By taking these risks, Netflix demonstrated resilience and adaptability in a competitive streaming market.
Netflix's Disruption: Netflix has outsmarted traditional Hollywood by adjusting its strategies and seizing opportunities amid strikes, leading to increased growth and a booming stock price, while legacy studios struggle to keep pace.
Netflix has successfully reestablished itself as a leader in the entertainment industry despite challenges faced by traditional Hollywood studios. Their strategies, such as tightening budgets and addressing password sharing, allowed them to grow even during the actors' and writers' strikes. As legacy companies like Disney and Warner Brothers struggle to adapt, Netflix's innovative approach disrupts the traditional business model in Hollywood. They have effectively turned obstacles into opportunities, showcasing their ability to thrive where others falter, and this success has led to a significant rise in their stock price. The impact of Netflix's strategies poses significant challenges for the established studios, making it clear that the landscape of entertainment is shifting.
Streaming Shift: Traditional media companies like NBC Universal and Warner Bros. are licensing shows to Netflix, finding better success. This 'Netflix effect' boosts their viewership and supports their finances as cable declines.
Many traditional media companies, like NBC Universal and Warner Bros., are realizing that their shows can perform better on streaming platforms like Netflix than on their own services. For example, the show 'Suits' rose to popularity after moving from Peacock to Netflix. This phenomenon, known as the 'Netflix effect,' helps create wider awareness and boosts viewership. As cable subscriptions decline, these companies are relying on licensing deals with Netflix to generate revenue and support their business. This trend shows a shift in the industry where legacy networks must adapt to a new streaming landscape, impacting how they allocate resources and develop new content. The decline of cable revenue, historically a financial pillar for major companies like Disney, is resulting in significant challenges as they look to maintain profitability amidst changing consumer viewing habits.
Netflix Impact: Netflix reshaped Hollywood's payment system with upfront deals for talent, sparking resentment in traditional film circles and refusing theater releases after COVID, while eyeing sports to maintain viewer interest.
Netflix has changed how Hollywood works, especially in how actors get paid. Instead of the traditional backend profit participation where actors earn money based on box office success, Netflix offers large upfront payments for projects. This has attracted top talent but also caused resentment among traditional studios. Additionally, after COVID, when theaters needed support, Netflix refused to release their films in cinemas, which upset many in the industry. Moving forward, Netflix is looking to learn from traditional entertainment companies and exploring new avenues like sports programming to keep viewers engaged.
Entertainment Evolution: The dominance of traditional Hollywood is declining as tech companies like Netflix, Amazon, and Apple take over, focusing on innovative content and experiences, while audiences remain tied to cable mainly for sports.
Many people keep their cable subscriptions primarily for sports, as streaming services like Netflix avoid costly sports deals. Instead, Netflix focuses on creating engaging sports-themed shows and unique live experiences, which help strengthen viewers' connection to their brand. Industry leaders like Barry Diller suggest that traditional Hollywood's influence is shifting towards technology companies such as Netflix, Amazon, and Apple, which have strong finances and innovation capabilities. This change indicates that the traditional dominance of Hollywood is fading, and the future of entertainment leadership is firmly in the hands of tech companies, even though established names like Disney continue to thrive. In this evolving landscape, how companies adapt and innovate will determine their relevance in the entertainment industry.
Entertainment's Future: Tech companies are reshaping entertainment, forcing traditional studios to innovate, especially with AI, to remain competitive amid financial challenges.
Barry Diller suggests that the future of entertainment will be influenced more by tech companies than traditional studios. Companies like Netflix excel due to their ability to collect and analyze data on user preferences, creating better streaming experiences. Traditional Hollywood studios might struggle to compete unless they innovate, particularly by integrating AI technology, which could help them reduce costs and keep producing content despite financial pressures. While AI holds the potential to significantly change the industry, it also risks displacing jobs. As traditional studios face budget constraints, they may increasingly turn to AI as a solution for staying relevant and efficient, sparking a major transformation in how entertainment is created and consumed.
How Netflix is upending Hollywood
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Recent Episodes from Behind the Money
Could Italy’s UniCredit reignite European banking?
After the financial crisis, dealmaking among banks in different countries in Europe fell to a standstill. But recently, Italian lender UniCredit revealed that it had built up a stake in Germany’s Commerzbank, prompting discussions of a possible tie-up. EU policymakers and politicians believe cross-border deals like this could unlock European banking and make it more competitive globally. So why is there resistance? The FT’s European banking correspondent Owen Walker explains.
Clips from Bloomberg, BBC
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For further reading:
Andrea Orcel plots UniCredit’s boldest move yet on Commerzbank
Andrea Orcel, Commerzbank and the redemption trade
Europe’s most notorious banking dealmaker returns
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On X, follow Owen Walker (@OwenWalker0) and Michela Tindera (@mtindera07), or follow Michela on LinkedIn for updates about the show and more.
Read a transcript of this episode on FT.com
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How Netflix is upending Hollywood
After mounting a comeback, Netflix shares recently hit all-time highs. But its success is in stark contrast to the rest of Hollywood, which is struggling to adapt in an industry that is becoming more and more dominated by tech companies. The FT’s Los Angeles bureau chief Chris Grimes explains how Netflix came out on top and how its dominance could change the rules of Hollywood.
Clips from AP Archive, CBS, Evening Standard, Reuters, NBC
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For further reading:
How Netflix won the streaming wars
Netflix profits surge after password-sharing crackdown
Streaming wars are over and Netflix won
Netflix faces tough battle in advertising wars
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On X, follow Chris Grimes (@grimes_ce) and Michela Tindera (@mtindera07), or follow Michela on LinkedIn for updates about the show and more.
Read a transcript of this episode on FT.com
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Why Volkswagen hit the skids
Volkswagen is facing a crisis. Often considered a symbol of Germany’s industrial power, it’s now reckoning with a difficult transition to electric vehicles, among other issues. And now, management is considering breaking a long-held taboo: closing German factories. Patricia Nilsson, the FT’s Frankfurt correspondent, heads to VW’s headquarters in Wolfsburg to examine the fallout and what’s next.
Clips from Bloomberg, DW News, CNN
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For further reading:
For European carmakers, EVs are a Catch-22
Why Volkswagen is seeking to break the taboo of closing German plants
VW audit of Xinjiang plant failed to meet international standards
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On X, follow Patricia Nilsson (@patricianilsson) and Michela Tindera (@mtindera07), or follow Michela on LinkedIn for updates about the show and more.
Read a transcript of this episode on FT.com
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How a 7-Eleven takeover could reshape corporate Japan
Companies in Japan have long avoided foreign acquisitions. But Canada-based Alimentation Couche-Tard’s recent unsolicited bid for the owner of the 7-Eleven convenience store chain is testing that premise. The FT’s Tokyo bureau chief Leo Lewis examines how these events could shape corporate Japan’s future.
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For further reading:
The takeover fight that could reshape Japan
After 7-Eleven, Japan’s M&A scene may never be the same again
7-Eleven bid is the next stage in revitalising corporate Japan
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On X, follow Leo Lewis (@urbandirt) and Michela Tindera (@mtindera07), or follow Michela on LinkedIn for updates about the show and more.
Read a transcript of this episode on FT.com
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Jay Powell – lucky or good?
As Jay Powell’s Federal Reserve contemplates making the first interest rate cut in more than two years, we’re taking a step back with the FT’s US financial commentator Robert Armstrong. How did Powell tame inflation without crashing the economy? And how might history judge his leadership?
Clips from Associated Press
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For further reading:
Martin Sandbu’s column: A self-congratulatory inflation narrative at Jackson Hole
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On X, follow Robert Armstrong (@rbrtrmstrng) and Michela Tindera (@mtindera07), or follow Michela on LinkedIn for updates about the show and more.
Want to hear more from Rob? Listen to the Unhedged podcast.
Read a transcript of this episode on FT.com
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Best Of: How Dubai is reshaping the global oil trade
This week, we’re revisiting an episode from last year. For decades, the global centre for oil trading has been Geneva, Switzerland. But Russia’s war in Ukraine changed that. Sanctions have made it harder for western traders to move Russian oil. Now, traders are flocking to a new trading hub that has no restrictions on oil from Russia: the United Arab Emirates. The FT’s Tom Wilson explains how this shift has helped the UAE replace Switzerland, and whether the global energy industry is shifting away from western economies.
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For further reading:
How Dubai became ‘the new Geneva’ for Russian oil trade
Switzerland questions oil trader over sidestep of Russian sanctions
Letter: Energy trading is opaque — and that suits Big Oil
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Register now for the FT Weekend Festival, and claim £24 off your pass using promo code FTPodcast at: ft.com/festival
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On X, follow Tom Wilson (@thomas_m_wilson) and Michela Tindera (@mtindera07), or follow Michela on LinkedIn for updates about the show and more.
Read the transcript of this episode which was first aired in August 2023
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Private credit’s ‘golden era’ shows signs of tarnish
Private credit took Wall Street by storm. But at a software company called Pluralsight, recent loan troubles are now highlighting risks that could be hidden in the sector. The FT’s senior US corporate finance correspondent Eric Platt and Due Diligence reporter Amelia Pollard walk through what went wrong with Pluralsight, and how that could shape private credit’s future.
Clips from Bloomberg, CNBC
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For further reading:
A messy loan restructuring highlights risk lurking in private credit
Private credit is even larger than you think
A buyout gone wrong creates fireworks in the private credit market
Vista and co-investors lose $4bn in Pluralsight restructuring
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On X, follow Eric Platt (@ericgplatt), Amelia Pollard (@ameliajpollard) and Michela Tindera (@mtindera07), or follow Michela on LinkedIn for updates about the show and more.
Register now for the FT Weekend Festival, and claim £24 off your pass using promo code FTPodcast at: ft.com/festival
Read a transcript of this episode on FT.com
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Is business better in Texas?
Hundreds of companies have moved their headquarters to Texas in recent years, including big names like Tesla, HP and Charles Schwab. They’ve been enticed by low taxes, light regulation and the promise to run their businesses on their own terms. But the FT’s Houston correspondent Myles McCormick explains that there might be limits to that message of economic freedom.
Clips from ABC News, CBS, Fox 26, KHOU 11
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For further reading:
Will US companies keep faith in the ‘Texas miracle’?
Beware the Texas advance on Wall Street
Texas group plans stock exchange to compete with NYSE and Nasdaq
For further listening:
Why Elon Musk is breaking up with Delaware
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On X, follow Myles McCormick (@mylesmccormick_) and Michela Tindera (@mtindera07), or follow Michela on LinkedIn for updates about the show and more.
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Register now for the FT Weekend Festival, and claim £24 off your pass using promo code FTPodcast at: ft.com/festival
Read a transcript of this episode on FT.com
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Is there a bubble waiting to burst in India?
Indian equities are soaring right now. The country’s benchmark Nifty 50 index has doubled in just five years, beating out the pace of Japan, China and even the US. And it’s all being driven by millions of domestic investors who are piling into the market for the first time. But this boom has regulators sounding the alarm. The FT’s Mumbai correspondent Chris Kay explains why a bubble might be forming and what could happen to these first-time investors if it bursts.
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For further reading:
The young investors gambling on Indian stocks
Investors bet an election win by Narendra Modi will extend India’s stock market boom
India closes in on China as largest emerging market
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On X, follow Chris Kay (@christopherkay) and Saffeya Ahmed (@saffeya_ahmed).
Read a transcript of this episode on FT.com
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The Economics Show with Soumaya Keynes: What’s wrong with economics?
This week, we’re bringing you something from our fellow FT podcast, The Economics Show with Soumaya Keynes.
Sir Angus Deaton won the Nobel Prize in Economics in 2015. So when he says he is rethinking many of his assumptions about the field, it matters. Today on the show, Soumaya discusses what we are getting wrong about everything from inequality to immigration to the role of globalisation in the reduction of poverty.
Soumaya Keynes writes a column each week for the Financial Times. You can find it here.
Subscribe to Soumaya's show on Apple, Spotify, Pocket Casts or wherever you listen.
Read a transcript of this episode on FT.com
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