Netflix and streaming runs out of steam

In the week Netflix is releasing its biggest-budget movie, the streaming service has reported it will be moderating growth in its content spending to match a squeeze on subscribers and revenues.

Netflix will spend about $17bn on content this year and is set to keep it around that level. It would have greenlit the $200mn budget for The Gray Man blockbuster action movie, starring Ryan Gosling, in better days, when subscribers were signing up and gorging themselves on content during pandemic lockdowns.

Times have changed. In April, it reported its decade-long run of subscriber growth ended in the first quarter with a decline of around 200,000 users, as competition among streaming services increased and consumers cut back on spending. On Tuesday, it recorded a further 970,000 net losses for the second quarter, although this was good news compared to the 2mn drop it had predicted.

Great content is still key in keeping subscribers, with executives describing it as the company’s “North Star”, driving engagement and viewing “because then we can drive member growth and monetisation around it”.

Franchises are an important part of that, in order to compete with the likes of Disney+ and its Star Wars series. The Gray Man is set to become one, alongside Stranger Things, Bridgerton and others.

Lex says some subscriber growth should return in the current quarter and the company has committed to creating a tier supported by advertising, a line that it once vowed never to cross, in order to wring more money out of some viewers. It also aims to clamp down on password sharing among its 220mn users.

Netflix was the worst-performing stock in the S&P 500 for the first half of this year. Its market value has shrunk from more than $300bn in November, to $90bn.

Anna Nicolaou reports the ‘Great Netflix Correction’, as it has become known in Hollywood, has triggered anxiety about the streaming business model and the future of entertainment.

Morgan Stanley this week described the situation as the “first streaming recession” and Bank of America cautioned that streaming has “very quickly become a commoditised product”. Anna says the question for both Wall Street and Hollywood is whether this downturn is temporary, or if the streaming business is fundamentally less attractive than executives had assumed.

The Internet of (Five) Things

1. ASML sets record for chip equipment orders
Dutch chipmaking equipment provider ASML is benefiting from the global rush to boost semiconductor production to resolve shortages and supply chain issues. It reported record net orders worth €8.5bn for the second quarter.

2. China VC realigns with Beijing policy
“Politically correct” sectors have emerged in China’s new economy, according to venture capital investors. These include “deep tech” such as AI and robotics, and “hard tech” like electric vehicle batteries and semiconductors. This could prove fertile ground for Sequoia China, which raised $9bn earlier this month to fund hundreds of start-ups.

3. EY break-up’s tech benefits
EY’s global boss Carmine Di Sibio has told the FT that a break-up of the Big Four firm would win its consulting division up to $10bn in extra fees by liberating it from conflicts of interest that restrict it from working alongside the likes of Amazon or Salesforce.

4. FTX seeks bitcoin futures approval
FTX is seeking to shake up the sprawling US derivatives market, marking the biggest intervention to date by a crypto group in to the heart of traditional finance. The three-year-old exchange, founded by Sam Bankman-Fried, is seeking approval from the US Commodity Futures Trading Commission to offer customers bitcoin futures. Alphaville looks at the disintermediation that would involve.

5. Abcam prefers New York to London
Abcam, a pioneering Cambridge biotech, is abandoning its London listing in favour of New York, despite the UK government’s efforts to make the country a life sciences superpower. This follows fresh doubts that chip designer Arm will list in London. Lex looks at the challenge of building big tech companies in Britain.

Tech tools — OnePlus and Samsung Galaxy launches

The dog days of August tend to mean a dearth of tech news (advance warning: #techFT will be on extended leave from August 1). However, here are two phone launches set to relieve the boredom. OnePlus announced today it would hold its second global flagship launch of this year in New York on August 3, with the OnePlus 10T 5G. It will feature the latest Qualcomm processor and The Verge can make out perhaps a three or four-camera array on the rear in the image above. A week later, on August 10, Samsung will unveil its next foldable phones at a Galaxy Unpacked event. What HiFi points out that’s almost a year to the day since an Unpacked event launched the Samsung Z Fold 3 and Z Flip 3, so their successors can be expected.