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How Netflix survived the streaming wars to stay the subscription video king

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How Netflix survived the streaming wars to stay the subscription video king

Four years ago, Netflix was faced with a formidable challenge to its dominance. Competitors including Walt Disney Co. and Warner Bros. Discovery invested billions of dollars to chip away at Netflix’s market share by launching splashy shows on their own streaming services.

For a time, it seemed that Netflix was vulnerable. The company lost subscribers for two straight quarters in 2022 despite gargantuan spending, raising concerns that its growth had plateaued.

But lately the tide has turned. Netflix has managed to maintain its position as the leader in subscription streaming, with 260 million paying customers worldwide, far more than its direct competitors. Netflix added more than 13 million subscribers during the fourth quarter. The Los Gatos, Calif.-based company’s stock has surged roughly 90% during the last year.

As a result, many analysts have made a bold proclamation in recent months. The so-called streaming wars are over, they say. Netflix has won. As evidence, they point to rival studios that are now licensing more of their programs to Netflix, including HBO’s “Six Feet Under” and “Insecure,” after years of holding onto their big action movies and popular shows for their own platforms.

“Their competitors are so desperate to make money, they’re giving this content to Netflix,” said Jeffrey Wlodarczak, chief executive of Pivotal Research Group. “This is what winning is.”

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Netflix executives, for their part, sound as confident as ever, even as the company continues to make changes, including a recent shakeup in its film business. There’s much more runway for Netflix to grow, Spencer Neumann, Netflix’s chief financial officer, said at a Morgan Stanley conference in San Francisco on Monday.

“We are just getting started,” Neumann said. “Now we’re small in every measure. Every way we look at it, we’re less than 10% of the view share in every country in which we operate, and that’s a pretty small slice of pie.”

How did Netflix defend its bulwark when there are still multiple streaming services fighting for eyeballs?

The streamer has cracked down on password sharing, offering a cheaper ad-supported plan for cost-conscious viewers. Added restrictions on viewers who were borrowing Netflix accounts got people to buy their own subscriptions, helping the company increase net income to $938 million in the fourth quarter, compared to $55 million a year ago, while revenue rose 12.5% to $8.8 billion.

Since then, Disney’s Hulu, Disney+ and ESPN+ and Warner Bros. Discovery’s Max also have signaled they will tighten their limits on password sharing.

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Netflix also diversified its content beyond scripted programs, adding more reality TV shows, non-English-language originals, live TV, games and sports documentaries to its mix.

And Netflix expanded its sports-related content. In January, the streamer announced it would become the exclusive host to WWE’s weekly pro wrestling show “Raw” in 2025, which analysts say will help boost Netflix’s advertising business and increase WWE’s global reach outside the U.S. “Raw” is the top show on the USA Network, where it brings in 17.5 million unique viewers over the course of the year, WWE and Netflix said.

“Introducing it to a new set of fans as well as servicing the existing fans that are either already Netflix subscribers, or will come over, to me either way is a win,” Brandon Riegg, vice president of nonfiction series at Netflix, said at a press event in Hollywood in January. “The truth is we don’t know how much bigger it can get. I think we’re all really bullish on it.”

A significant factor in Netflix’s lead is that it had a major head start, entering the streaming arena in 2007, much earlier than many of its Hollywood competitors. It set up production hubs in different countries around the world, including South Korea, where Netflix has had success with a pipeline of K-dramas that can be dubbed into many different languages. The company also built a robust platform with recommendations based on a user’s past viewing habits, with trailers and titles promoted tailored to their tastes.

“They built scale quicker than anybody else, and that scale in turn leads to a shorter road for a new original to become a hit because they have such a wider audience available to sample,” said Brandon Katz, industry strategist for Parrot Analytics. “They have done a very good job of maintaining their market-leading position in the streaming industry, even as competition and macroeconomic industry factors have thrown a lot of challenges at them.”

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Meanwhile, Wall Street started to turn on legacy media companies including Disney, Paramount and Warner Bros. Discovery, which had sacrificed traditional television and box office revenue to fuel their streaming ambitions. Stock market pressure encouraged those businesses to rein in their spending on direct-to-consumer operations.

Even Walt Disney Co. Chief Executive Bob Iger acknowledged Netflix’s technological prowess at a Morgan Stanley conference on Tuesday.

“We’re now in the process of creating and developing all of that technology, and obviously the gold standard there is Netflix,” Iger said.
“We need to be at their level in terms of technology capability.”

Disney+ has 111.3 million subscribers as of its first fiscal quarter (excluding Disney+ Hotstar). Warner Bros. Discovery counts 97.7 million subscribers in its direct-to-consumer category, which includes Max, HBO, Discovery+ and premium sports product in the fourth quarter.

Netflix also resolved some analyst concerns about its debt levels. In 2021, the streamer said it would no longer need to raise external financing for its day-to-day operations.

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And while last year’s six months of Hollywood strikes hobbled film and TV production and thinned out studios’ TV and movie schedules, Netflix appeared to weather the disruption better than many rivals.

Striking writers and actors raised concerns about streaming services, blasting Netflix and others for not financially rewarding them enough when programs became hits. They demanded more data transparency and substantial increases in pay. Some people in the industry called last summer’s labor stoppages the “Netflix strike,” citing changes the company popularized in how the entertainment industry does business. Many productions, including work on the upcoming seasons for “Stranger Things” and “Cobra Kai,” were delayed due to the labor stoppages.

The Writers Guild of America and SAG-AFTRA were able to achieve many of their aims in their new contracts. Nonetheless, Netflix continued to increase its subscriber base during the strikes. One of the titles that gained traction on Netflix over the summer was the legal drama “Suits,” a USA Network series that ran from 2011 to 2019 but gained a new surge of cultural relevance last year when it appeared on the service.

Production overseas also helped, as it is usually less expensive than producing programs in the U.S., analysts said.

“You can see how the content budget would get more bang for its buck if they could actually produce a ‘Squid Game’ every year here in America,” Katz said. “The more they’re able to get some of that South Korean programming, Indian programming, Spanish-language programming, to really kind of pop on the charts here in America, the longer their dollar goes, the less they have to rely on more costly American-made series.”

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Two years ago, the future of Netflix was murkier as it navigated a correction in the streaming industry. At the start of the pandemic, streamers including Netflix saw massive growth as people sheltered at home and looked for ways to entertain themselves. But eventually the subscriber growth slowed down, with Netflix reporting a decline in customers in the first half of 2022. The hiccup was startling to investors, considering the sums the company was spending on content, and the stock tumbled.

Netflix laid off hundreds of workers and began investing in new areas of business, including launching an ad-supported streaming plan, after years of being averse to commercials on its platform. It acquired game studios and increased its live event offerings on Netflix with mixed results, including hosting this year’s SAG Awards and, recently, a series in which chef David Chang cooks for celebrities. It’s also held live reality-show reunions and stunt sports events, including “The Netflix Slam” tennis match.

But as Netflix continues to expand its customer base, it will face ongoing competition for customer time and money. Some analysts remain skeptical about the return on investment from the company’s movie strategy, which was a 70-movie schedule in 2021 and included big-budget blockbuster-type action movies like “Red Notice.”

In January, Netflix announced its film chief, Scott Stuber, was leaving in mid-March to start his own media business. His role will be filled by Dan Lin, CEO of production company Rideback, starting in April.

But Netflix has downplayed the notion that the company’s approach to original film is changing. Neumann said having original films on its service is an important part of the entertainment that Netflix provides and the value it delivers to its customers.

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“The film business has come a long way. It’s a nice success for us,” Neumann said at the Morgan Stanley conference on Monday. “With Dan, we’re excited to take it to the next level. Just like everything we do. We’re trying to continue to improve, so we’re gonna build from there.”

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Read Nick Bilton’s Letter to Scott Pelley

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Read Nick Bilton’s Letter to Scott Pelley

Dear Mr. Pelley:

I meant what I said in my letter last week to the 60 Minutes team: joining 60 Minutes is the honor of my career and I am grateful to be working alongside the people who have contributed to the most important television journalism brand this country has ever produced. While I’m new to 60 Minutes, I’ve devoted my career to investigative journalism and storytelling. I started this job excited to collaborate and to benefit from the wisdom and experience of the 60 Minutes veterans, with you among them. For that reason, one of the first things I did in my new role was call you to talk and invite you to dinner. It is a profound disappointment that you rejected that overture and chose ambush instead. Yesterday, you hijacked my first meeting with staff to disparage me, my qualifications, and my intentions with remarkable incivility and contempt. I welcome a diversity of viewpoints and respectful debate among the team, but this was nothing of the sort. Yesterday’s performative display of hostility enacted in front of the staff instead of in a civil, private conversation-demonstrated that you have no interest in contributing to the future success of the show, or approaching my new tenure with a mind open to collaboration and progress. I am here to deliver first-in-class news programming, not to make headlines about newsroom drama. I am eager to work alongside those who share this goal.

Despite yesterday’s misconduct, I had hoped that in sitting down with you today we could find a path forward together. You made clear that you are not interested in such a path.

Your antipathy to the future of the show has come through loud and clear. And I have heard you. I therefore write on behalf of CBS News, Inc. (“CBS”) to inform you that your employment with CBS is terminated for cause effective immediately. Enclosed is your formal termination letter.

Sincerely,

Nick Bilton

Executive Producer, 60 Minutes

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Aspiration co-founder sentenced to 14 years for fraud

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Aspiration co-founder sentenced to 14 years for fraud

The co-founder of Aspiration, Joseph Sanberg, was sentenced to 14 years in prison on Monday after defrauding investors and lenders of over $248 million.

The startup, an eco-friendly digital banking company boasting fossil fuel-free investments, carbon offsets for gas purchases, and a debit card with cash-back benefits for shopping at clean companies, was founded by Sanberg and Andrei Cherny. Cherny left the company in 2022 and has not been charged.

Sanberg, an Orange County native, pleaded guilty to wire fraud in October after being arrested in March last year. Aspiration subsequently filed for bankruptcy and liquidated all of its assets by July.

Sanberg and venture capitalist Ibrahim AlHusseini, who also faces charges, together forged a series of bank statements in order to obtain loans. From 2020 to 2021, the pair forged AlHusseini’s bank statements to show millions of dollars in assets in order to obtain millions of dollars from lenders.

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Additionally, they forged a letter from their audit committee stating that $250 million in funds were available, when in reality Aspiration had less than $1 million. The amount of loans defrauded exceeded $248 million.

In 2021, Sanberg artificially inflated Aspiration’s 2021 revenue by $44 million by recruiting 27 fake customers to sign letters of intent pledging tens of thousands of dollars per month for tree planting services. Sanberg himself funded the contracts and used the inflated revenue numbers to obtain more loans.

The charges sparked an NBA investigation into salary cap allegations due to Aspiration’s connections with Clippers owner Steve Ballmer.

Ballmer personally invested $60 million in Aspiration, all of which was lost. He is now the target of a civil lawsuit alleging his participation in the scheme. Ballmer denies the allegations.

The team announced a $300-million sponsorship deal with Aspiration, and Clippers player Kawhi Leonard signed a four-year, $28-million marketing contract with the company, which reportedly performed no duties. The issue has raised concerns about how players are circumventing the NBA’s salary cap.

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The team lost the $300-million sponsorship deal and an additional $20 million paid for carbon offset purchases.

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Monterey Park takes landmark vote on banning data centers

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Monterey Park takes landmark vote on banning data centers

Residents in the city of Monterey Park will be the first in the nation to vote on a permanent ban on data centers Tuesday.

If approved, Measure NDC would prohibit data centers within the city limits and could only be overturned by another vote.

Yard signs saying “No Data Center” in English and Chinese with images of dragons line sidewalks in the San Gabriel Valley city.

As a wave of data center opposition sweeps the country, numerous towns and counties across the U.S. have instituted temporary moratoria and other restrictions on the facilities. But only a handful have instituted indefinite bans, and just four other towns have sent related matters to the ballot.

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Supporters are hoping the vote will set a precedent for the rest of the region, where residents are fighting proposals in Vernon and City of Industry.

“This is about as permanent a ban as we can get,” said Steven Kung, co-founder of the group No Data Center Monterey Park. “Winning Measure NDC would send a huge message to the rest of the San Gabriel Valley about how residents don’t want data centers.”

The ballot measure emerged from the fight against a 247,000-square-foot center proposed in 2024 by the Australian-owned investment firm HMC StratCap for a residential area in Monterey Park.

The facility would have sat less than 500 feet away from the nearest home and used three times the electricity of the 60,000-person, predominantly Asian American city.

While the developer touted the potential for jobs and tax revenue, residents expressed concerns about noise and air pollution, rising electricity rates and a potential to lower property values.

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The company pulled its plans in late March following public outcry and a March 4 city council vote to extend a temporary data center moratorium and place a ban on Tuesday’s ballot.

In a letter to the city council, HMC StratCap said it would pursue a different use for the land and would not engage in a ballot measure fight.

The city council later banned data centers indefinitely, the first in California to do so, said Mayor Elizabeth Yang. But she’s still been out campaigning for the measure with all four other council members.

“If a council puts in an ordinance, a future council can reverse it too,” said Yang. “With the ballot measure, unbanning it is a lot harder because you need the entire city to vote on it.”

The measure proposes the ban “to protect air quality, drinking water resources, and public health” and “prevent impacts to electricity and water rates.”

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While California places third in the country for existing data centers with about 300 facilities, it hasn’t been a hot spot in the recent AI-driven data center boom. High electricity rates, expensive land and regulatory hurdles mean that fewer, and smaller, facilities are currently planned than in Virginia, Texas, Georgia, Illinois or Arizona.

“Most of California’s data centers are small by today’s standards,” said Shaolei Ren, an engineering professor at UC Riverside who studies how to reduce the environmental impacts of data centers. “Ten years ago, they would be medium-sized, but the power demand for new AI data centers has increased a lot.”

The average operating data center demands 45 megawatts, according to the Washington Post, while the average planned one would draw 430 MW. The one proposed for Monterey Park would have required about 50 MW at peak demand.

As proposals crop up in SoCal, they’re met with fierce opposition. Montebello, El Monte and Baldwin Park have all enacted temporary moratoria, and Alhambra recently banned data centers as part of a zoning code update. City of Industry, Vernon, City of Commerce and Santa Fe Springs are moving in the other direction, trying to court developers and streamline data center approvals. Community groups are fighting that.

Outside the San Gabriel Valley, residents of Coachella and Imperial County are showing up in droves to protest local proposals.

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Matthew Shaw, a volunteer with the Coalition for Responsible Data Center Development, who recently published a report on opposition to AI data centers, said a vote to ban them in Monterey Park “would lead to copycats, partially because so many groups are just opposed to any data center development at all.”

While there is no formal opposition to Measure NDC, some building trades like Ironworker Local 433 supported the Monterey Park data center when it was still live before city council. Those in the data center industry are lamenting the state of public opinion.

“These are multi-billion-dollar assets that are built by multi-trillion-dollar companies. These things will get done,” said Mehdi Paryavi, chairman of the International Data Center Authority. “My biggest problem is that our industry does not invest enough in community engagement.”

Paryavi said towns that seek to limit data centers are missing out on thousands of jobs generated by data center construction, operations and customers, as well as faster artificial intelligence speeds and better performance.

Kung said local community organizers are “looking at the empirical evidence” and seeing a ban as a win.

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“We’ve never seen a city that embraces a data center and is like, ‘Look how our quality of life has increased, look how all the revenue has gone into citywide improvements,’” he said. “That just doesn’t exist.”

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