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Trouble for Netflix: When the Insurgent Becomes the Incumbent

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Will the last half of the year be a difficult time for Netflix? A recent report from MIDiA Research aims to show the likely course that Disney+, WarnerMedia, and Apple TV+ will experience when they launch later this year, but my take after reading it is that not all is golden for the golden child.

BlogFor one thing, people simply aren't watching as much Netflix as they used to. In 2015, the average Netflix subscriber in the U.S. watched 617 hours per year. In 2018, that fell to 616 hours. The drop was more stark abroad where the average fell from 600 hours per year to 410 hours. Blame increased competition and the fact that we only have so many hours in our days. Over half—52%—of Netflix subscribers have multiple SVOD subscriptions, MIDiA says. Those people all want to sample the best of every service. They're not watching every Netflix original like they did in the beginning.

That decline in engagement wouldn’t matter so much expect for another revealing finding: Netflix, the report says, is paying twice as much just to stand still. The amount Netflix spends on original content ballooned from $4.6 billion per year in 2015 to $10 billion in 2018.

Not only that, but new competition is taking valuable library content away from Netflix. Friends, for example, leaves Netflix later this year, and The Office leaves at the end of 2020.

"Although original content drives initial engagement with streaming services, it is the services’ library that keeps them there," the report says. And it calls Netflix's library its Achilles heel. It's in the back catalog that Disney and WarnerMedia stand the best chance of disturbing the SVOD giant.

Netflix has dominated the SVOD space and it's hard to see it changing, but it just might. I don't believe the average household will pony up for more than three subscriptions, and the competition is going to get a lot stronger in the next half-year.

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