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Netflix is finally taking a page from the rest of Hollywood

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Netflix was supposed to change how Hollywood does business

Illustration by Alex Castro / The Verge

In Q1 of 2022, it finally happened: Netflix had a bad quarter. It lost over 200,000 subscribers and acknowledged that newer competitors like Disney Plus and HBO Max were effectively putting an end to how the company had been doing business for nearly a decade. Now, Netflix is steering away from the frenetic release pace and midsized films that made it a near-critical darling with a new plan to make “bigger movies” at a less “gluttonous pace” according to a report from The Hollywood Reporter.

You know, kind of what most of Hollywood is already doing.

A major takeaway from The Hollywood Reporter’s piece is that, while it appears Netflix isn’t exactly sure what it wants to make, it just wants to make it more thoughtfully than it has for the past decade.

But the past decade wasn’t just about flooding the zone with content in an effort to quickly build a library that could attempt to rival those of Disney and Warner Bros. It was also about Netflix trying to bring a bit of the tech mindset into Hollywood. In Hollywood, caution is key. The reason Hollywood moved away from the midrange films Netflix briefly made its bread and butter is because Hollywood found bigger and more consistent returns on huge blockbusters (usually involving some sort of superhero or an actor who plays a superhero in another franchise).

Netflix, with its then near-endless source of cash and no need to please distributors or theaters, could afford to produce more varied content to try and secure people’s subscriptions every month. And it could further rationalize the heavy spending because it was trying to better understand audiences through meticulous analysis of viewer data that its competitors just didn’t have access to.

Netflix was supposed to transform Hollywood. Instead, it’s turning to the same practices that made its competitors giants, only without the lucrative franchises, fandoms, and huge back catalogs those same competitors enjoy.

Netflix is already working on creating a new ad-supported subscription tier to secure more subscribers reluctant to spend cash in the Streaming Wars. Peacock and Paramount Plus both have similar tiers already, and both Disney Plus and HBO Max plan to add ad-supported tiers as well.

Netflix is also cracking down on password sharing, a practice that it claims over 100 million households use to avoid additional subscriptions. Previously, password sharing was seemingly ignored by the company — and sometimes even implicitly endorsed. HBO Max, meanwhile, had mitigations for password sharing built-in.

But the biggest way Netflix is now chasing the competition is in how it's choosing what films to make. CEO Ted Sarandos noted in Netflix’s last earnings call that it would focus on “big event films,” and the company has spent the last couple of months ruthlessly wiping out large parts of departments like animation (which is typically more expensive to produce with lower returns), original independent features, and family live-action films.

You’ll note that two of those, animation and family live-action, are also areas where Netflix’s biggest competitor, Disney, does sterling business. It's almost like Netflix is doing what many film companies have done before: stepping away from competing with the House of the Mouse in the areas it’s historically dominated.

But, given Disney is the largest producer and distributor of films in the US by a very wide margin, has a near monopoly in theaters, and has a library of the largest franchises in the history of film, pulling away from its competition might not help Netflix. And structuring itself more like Hollywood might not help either. When Bob Chapek took over as CEO of Disney, he quickly began reorganizing the company to function more like a tech company.

Trying to bring the tech ethos to Hollywood may wind up not being a major win for Netflix, but the same can’t be said for its competitors.

Disclosure: The Verge is currently producing a series with Netflix.