Netflix’s Stumble Could Be a Warning Sign for Streaming Industry

Many entertainment executives, tired of playing catch-up to a Silicon Valley interloper, have been waiting for the comeuppance of Netflix. But this may not have been the way they hoped it would happen.

Netflix said this week that it lost more subscribers than it signed up in the first three months of the year, reversing a decade of steady growth. The company’s shares nose-dived 35 percent on Wednesday while it shed about $50 billion in market capitalization. The pain was shared across the industry as the stock of companies like Disney, Warner Bros. Discovery and Paramount also declined.

Netflix blamed a number of issues, ranging from increased competition to its decision to drop all its subscribers in Russia because of the war in Ukraine. To entertainment executives and analysts, the moment felt decisive in the so-called streaming wars. After years of trying, they may see a chance to gain ground on their giant rival.

But Netflix’s stunning reversal also raised a number of questions that will have to be answered in the coming months as more traditional media companies race toward subscription businesses largely modeled after what Netflix created. Is there such a thing as too many streaming options? How many people are really willing to pay for them? And could this business be less profitable and far less reliable than what the industry has been doing for years?

advertising-supported tier in the next year or two. Netflix also said it would crack down on password sharing, a practice that in the past it said it had no problem with.

“We’ve been thinking about that for a couple of years, but when we were growing fast it wasn’t a high priority to work on,” Mr. Hastings said. “And now, we’re working superhard on it.”

Netflix has no advertising sales experience, while rivals like Disney, Warner Bros. Discovery and Paramount have vast advertising infrastructure. And the password crackdown led some analysts to wonder whether Netflix has already reached market saturation in the United States.

Mr. Hastings tried to reassure everyone that Netflix had been through tough times before and that it would solve its problems. He said the company was now “superfocused” on “getting back into our investors’ good graces.”

Brooks Barnes contributed reporting.

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Disney, Built on Fairy Tales and Fantasy, Confronts the Real World

Since its founding in 1923, Disney has stood alone in Hollywood in one fundamental way: Its family-friendly movies, television shows and theme park rides, at least in theory, have always been aimed at everybody, with potential political and cultural pitfalls zealously avoided.

The Disney brand is about wishing on stars and finding true love and living happily ever after. In case the fairy tale castles are too subtle, Disney theme parks outright promise an escape from reality with welcome signs that read, “Here you leave today and enter the world of yesterday, tomorrow and fantasy.”

Lately, however, real world ugliness has been creeping into the Magic Kingdom. In this hyperpartisan moment, both sides of the political divide have been pounding on Disney, endangering one of the world’s best-known brands — one that, for many, symbolizes America itself — as it tries to navigate a rapidly changing entertainment industry.

In some cases, Disney has willingly waded into cultural issues. Last summer, to applause from progressives and snarls from the far right, Disney decided to make loudspeaker announcements at its theme parks gender neutral, removing “ladies and gentlemen, boys and girls” in favor of “dreamers of all ages.” But the entertainment giant has also found itself dragged into the fray, as with the recent imbroglio over a new Florida law that among many things restricts classroom instruction through third grade on sexual orientation and gender identity and has been labeled by opponents as “Don’t Say Gay.”

Disney then aggressively denounced the bill — only to find itself in the cross hairs of Fox News hosts and Florida’s governor, Ron DeSantis, who sent a fund-raising email to supporters saying that “Woke Disney” had “lost any moral authority to tell you what to do.” Florida lawmakers began threatening to revoke a 55-year-old law that enables Walt Disney World to essentially function as its own municipal government. (Disney had already been at odds with the governor on pandemic issues like a vaccine mandate for employees.)

In trying to offend no one, Disney had seemingly lost everyone.

Candlelight Processional events, Bible verses and all.

It took the company until 2009 to introduce a Black princess.

But in recent years, there has been a noticeable change. Robert A. Iger, who served as chief executive from 2005 to 2020, pushed the world’s largest entertainment company to emphasize diverse casting and storytelling. As he said at Disney’s 2017 shareholder meeting, referring to inclusion and equality: “We can take those values, which we deem important societally, and actually change people’s behavior — get people to be more accepting of the multiple differences and cultures and races and all other facets of our lives and our people.”

powerful Afrocentric story line. Under his tenure, Disney refocused the “Star Wars” franchise around female characters. A parade of animated movies (“Moana,” “Coco,” “Raya and the Last Dragon,” “Soul,” “Encanto”) showcased a wide variety of races, cultures and ethnicities.

The result, for the most part, has been one hit after another. But a swath of Disney’s audience has pushed back.

review bombed” in the fall because it depicted a gay superhero kissing his husband, with online trolls flooding the Internet Movie Database with hundreds of homophobic one-star reviews. In January, Disney was accused by the actor Peter Dinklage and others of trafficking in stereotypes by moving forward with a live-action “Snow White” movie — until it was revealed that the company planned to replace the seven dwarfs with digitally created “magical creatures,” which, in turn, prompted complaints by others about the “erasure” of people with dwarfism.

Disney executives tend to dismiss such incidents as tempests in teapots: trending today, replaced by a new complaint tomorrow. But even moderate online storms can be a distraction inside the company. Meetings are held about how and whether to respond; fretful talent partners must be reassured.

As Disney prepared to introduce its streaming service in 2019, it began an extensive review of its film library. As part of the initiative, called Stories Matter, Disney added disclaimers to content that the company determined included “negative depictions or mistreatment of people or cultures.” Examples included episodes of “The Muppet Show” from the 1970s and the 1941 version of “Dumbo.”

“These stereotypes were wrong then and are wrong now,” the disclaimers read.

The Stories Matter team privately flagged other characters as potentially problematic, with the findings distributed to senior Disney leaders, according to two current Disney executives, who spoke on the condition of anonymity to discuss confidential information. Ursula, the villainous sea witch from “The Little Mermaid” (1989), was one. Her dark color palette (lavender skin, black legs) could be viewed through a racial lens, the Stories Matter team cautioned; she is also a “queer coded” character, with mannerisms inspired in part by those of a real-life drag queen.

changing of the guard, with Mr. Iger stepping down as executive chairman in December.

Mr. Iger occasionally spoke out on hot-button political issues during his time as chief executive. His successor, Bob Chapek, decided (with backing from the Disney board) to avoid weighing in on state political battles. Disney lobbyists would continue to work behind the scenes, however, as they did with the Florida legislation.

gently explored gender identity. Gonzo donned a gown, defying a directive from Miss Piggy “that the girls come as princesses and the boys come as knights.” Out magazine wrote that the episode “just sent a powerful message of love and acceptance to gender-variant kids everywhere!” And a far-right pundit blasted Disney for “pushing the trans agenda” on children, starting an online brush fire.

Around the same time, some L.G.B.T.Q. advocates were criticizing Disney over “Loki,” a Disney+ superhero show. In the third episode of “Loki,” the title character briefly acknowledged for the first time onscreen what comic fans had long known: He is bisexual. But the blink-and-you-missed-it handling of the information angered some prominent members of the L.G.B.T.Q. community. “It’s, like, one word,” Russell T. Davies, a British screenwriter (“Queer as Folk”), said during a panel discussion at the time. “It’s a ridiculous, craven, feeble gesture.”

The fighting will undoubtedly continue: The Disney-Pixar film “Lightyear,” set for release in June, depicts a loving lesbian couple, while “Thor: Love and Thunder,” arriving in July, will showcase a major L.G.B.T.Q. character.

Last month, when Disney held its most recent shareholder meeting, Mr. Chapek was put on the spot by shareholders from the political left and right.

One person called Disney to task for contributions to legislators who have championed bills that restrict voting and reproductive rights. Mr. Chapek said that Disney gave money to “both sides of the aisle” and that it was reassessing its donation policies. (He subsequently paused all contributions in Florida.) Another representative for a shareholder advocacy group then took the microphone and noted that “Disney from its very inception has always represented a safe haven for children,” before veering into homophobic and transphobic comments and asking Mr. Chapek to “ditch the politicization and gender ideology.”

In response, Mr. Chapek noted the contrasting shareholder concerns. “I think all the participants on today’s call can see how difficult it is to try to thread the needle between the extreme polarization of political viewpoints,” he said.

“What we want Disney to be is a place where people can come together,” he continued. “My opinion is that, when someone walks down Main Street and comes in the gates of our parks, they put their differences aside and look at what they have as a shared belief — a shared belief of Disney magic, hopes, dreams and imagination.”

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Streaming Took Over Hollywood. Will It Take Best Picture, Too?

The pandemic accelerated the disruption. Traditional studios like Paramount, Universal, Sony, Warner Bros. and Disney rerouted dozens of theatrical films to streaming services or released them simultaneously in theaters and online. For the second year in a row, the Academy of Motion Picture Arts and Sciences, citing the coronavirus threat, allowed films to skip a theatrical release entirely and still be eligible for Oscars. The academy had previously required at least a perfunctory theatrical release of at least a week in Los Angeles.

This is about more than Hollywood egotism. The worry is that, as streaming services proliferate — more than 300 now operate in the United States, according to the consulting firm Parks Associates — theaters could become exclusively the land of superheroes, sequels and remakes. The venerable Warner Bros. has slashed annual theatrical output by almost half and built a direct-to-streaming film assembly line. Last week, Amazon boosted its Prime Video service by acquiring Metro-Goldwyn-Mayer, the old-line studio behind “Licorice Pizza,” which is nominated for three Academy Awards, including best picture.

In a year when Hollywood largely failed to jump-start theatrical moviegoing, streaming services solidified their hold on viewers. Global ticket sales totaled $21.3 billion in 2021, down from $42.3 billion in 2019, according to the Motion Picture Association. (Theaters were closed for much of 2020.) Some theater companies have gone out of business, others have merged; the world’s biggest theater chain, AMC Entertainment, racked up $6 billion in losses over the past two years and its stock has dropped 66 percent since June. At the same time, the number of subscriptions to online video services around the world grew to 1.3 billion, up from 864 million in 2019, the group said.

One film that struggled at the box office was Mr. Spielberg’s “West Side Story,” which received an exclusive run in theaters (per his wishes) of about three months. It collected about $75 million worldwide (against a production budget of $100 million and global marketing costs of roughly $50 million). “West Side Story” is now available on not one but two streaming services, Disney+ and HBO Max, where it has almost assuredly been viewed more widely than in theaters. But the film was never able to recover — among Oscar voters — from being branded a box office misfire. It received seven nominations, and is poised to win in one category, for Ariana DeBose as best supporting actress.

Mr. Spielberg’s also-ran presence in the current Oscar race makes the ascendance of streaming contenders all the more striking: a lion in the fight to keep the Academy Awards focused on theatrical films is pushed aside.

However unlikely, it is possible that “West Side Story” could come from behind and win the best picture trophy. So could Kenneth Branagh’s “Belfast,” for that matter. Such an outcome would be a bit like 2019, when academy voters, turned off by an over-the-top campaign by Netflix to push “Roma” to best picture glory, instead gave the prize to “Green Book,” a traditional film from Universal Pictures.

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Without Box Office or Streaming Numbers, Hollywood Finds It Tough to Plan

“The Suicide Squad” should have been a big hit for Warner Bros. last month. It had superheroes, a marquee director (James Gunn), a huge production budget ($185 million) and received terrific reviews. But instead of delivering a box office ka-pow, it went ker-thud: Ticket sales total $156 million (split roughly 50-50 with theaters), compared with $747 million for the first “Suicide Squad” in 2016.

Of course, the latest one had to battle a pandemic. And it was also made available free on HBO Max in lock step with its theatrical debut. On that platform, it was a relative success — at least according to HBO Max, which heralded “The Suicide Squad” as the service’s second-most-viewed movie debut of the year.

But it offered no numbers.

“Paw Patrol: The Movie” (Paramount) was released simultaneously in theaters and on Paramount+ late last month. It took in $13 million over its first weekend, enough for second place behind “Free Guy,” a holdover. But the actual demand for “Paw Patrol” was shrouded. Regal Cinemas, the second-largest multiplex chain in the United States behind AMC Entertainment, refused to play the animated adventure because of its streaming availability. Paramount+ said on Aug. 25 that the movie “ranked as one of the service’s most-watched originals.”

But it offered no numbers.

In contrast, Disney-Marvel released “Shang-Chi and the Legend of the Ten Rings” exclusively in theaters on Friday. Disney’s chief executive had called the old-fashioned release an “experiment.” Would the coronavirus keep people at home?

In surveys in late August of American moviegoers by the National Research Group, a film industry consultant, about 67 percent of respondents said they felt comfortable (“very or somewhat”) sitting in a theater. Disney has cited coronavirus concerns for making films like “Jungle Cruise,” “Cruella” and “Black Widow” available in homes on Disney+ at the same time as in theaters (even though Hollywood has suspected that the real reason — or at least an equally important one — has been helping Disney+).

The crystal-clear result: Audiences flocked to “Shang-Chi,” which was on pace to collect $83.5 million from 4,300 theaters in the United States and Canada from Friday through Monday, according to Comscore, which compiles box office data. Overseas, the well-reviewed movie, notable for being Marvel’s first Asian-led superhero spectacle, generated an additional $56.2 million. “Shang-Chi” cost roughly $200 million to make.

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