Netflix's binge-release model is under new scrutiny as the streaming giant struggles

Could Netflix ditch its binge-release model? Stranger things have happened.

The all-at-once release strategy for television shows is a bedrock of Netflix's strategy. The first seven episodes of "Stranger Things," which all premiered on May 27, broke records. It was the biggest premiere weekend ever for an English-language TV show on the service with nearly 287 million hours watched.

Despite the success of its marquee series, however, Netflix is struggling to jumpstart subscriber growth. So its binge strategy is facing new scrutiny as the company looks for ways to better retain its subscriber base.

"With Netflix, or anyone, never say never," said Peter Csathy, founder and chairman of advisory firm Creative Media. "Just like they said 'no way, no advertising,' don't assume that binge viewing is forever." He added: "Binge viewing is on the table."

Investors are questioning Netflix's ability to address subscriber losses and growing competition in the streaming space. The streamer's stock plummeted over the past year from $700 per share to around $160. The company reported a loss of 200,000 global subscribers during its first quarter earnings report in April. It also warned of deepening trouble ahead, forecasting it would lose around 2 million global paid subscribers during the second quarter.

Now, Netflix is reconsidering several core tenets that once made it the king of the nascent streaming world. Co-CEO Reed Hastings said the company is exploring lower-priced, ad-supported tiers in a bid to bring in new subscribers after years of resisting advertisements on the platform.

Those familiar with the streaming space suggest more changes could come, including a stronger focus on franchise content and even a change to staggered releases of new episodic content.

Netflix has toyed with different release models, mostly due to pandemic-related delays in production, and noted that splitting seasons into two parts can be a "satisfying long binge experience" for subscribers. Still, the company has made no indication that it will transition away from releasing all episodes of scripted series at once. Instead, decisions will be made on a case-by-case basis.

Netflix declined to comment.

"When Netflix started it really had the field to itself,"  said Robert Thompson, a professor at Syracuse University and a pop culture expert. "One of the reasons they started binging was to get people talking and to really launch their new original programming. They succeeded in that. Now, however, it's a very different case."

Netflix no longer has licensed content like "The Office" or "Friends," which kept subscribers coming back month after month to watch on repeat. Instead, it has several high profile shows, like "Stranger Things," "Bridgerton" and "The Witcher" — as well as an expansive library of series that haven't reached the same level of prestige or popularity.

Thompson noted that all shows released on streaming services eventually become bingeable. It is how they are first introduced to audiences that the platforms control.

"Releasing all at once, the Netflix model, increases the binge value," said Nick Cicero, vice president of strategy at data analytics company Conviva. "This allows customers to consume at their own pace, but relies on a deep catalog."

"The flip side," he said, "is week over week, which is designed to bring people back and give them something to look forward to. It's a very different model of marketing."

On services such as Disney+, HBO Max and Hulu, individual episode releases keep audiences hooked over the course of several weeks, meaning less churn on a month-to-month basis. Meanwhile, Netflix subscribers can watch a full season of a show they are interested in and then leave the service at the end of the month.

Stringing content throughout the year allows services like Disney to entice subscribers to stay each month but also persuade them to pay for an annual subscription up front. The company's Disney+ platform utilizes its two biggest franchises — Star Wars and Marvel — to keep subscribers coming back.

The company released "The Book of Boba Fett," which ran from late December 2021 until early February. Then added "Moon Knight" in late March, which ran until early May. Then in late May, it released "Obi-Wan Kenobi," which will continue through late June. "Ms. Marvel" arrived early June and will run through late July. August has the release of "She-Hulk," which carries episodes through October, and then "Andor," which will wrap its first season in November.

Then in December, Disney+ will release the "Guardians of the Galaxy" Christmas special. In staggering these releases, the company can entice Star Wars fans and Marvel fans to stick with the service long term.

"With Netflix, it is super easy to join for three-to-six months and then leave for three-to-six months," said Michael Pachter, analyst at Wedbush. "Once 'Stranger Things' is over and 'Ozark' is over, what now?"

In recent years, Netflix has experimented with weekly releases for some reality shows, but has not tried this strategy with scripted series.

"We fundamentally believe that we want to give our members the choice in how they view," Peter Friedlander, Netflix's head of scripted series for U.S. and Canada, said earlier this month. "And so giving them that option on these scripted series to watch as much as they want to watch when they watch it, is still fundamental to what we want to provide."

Netflix has, however, dabbled in splitting seasons in half or in parts in order to spread them out. The fourth and final season of "Ozark" was segmented in two, and so was the latest season of "Stranger Things." The final two episodes of "Stranger Things" season four, including its 2.5-hour finale, will start streaming July 1.

"Splitting the seasons actually had a practical reason before, which was the Covid delays and all those projects that kind of led us to splitting some of the seasons," co-CEO Ted Sarandos said during the company's first quarter earnings call in April. "But what we found is that fans kind of like both."

"So being able to split it gives them a really satisfying binge experience for those people who want that really satisfying long binge experience," he said. "And then being able to deliver a follow-up season in a few months versus, in some cases, the new season of 'Stranger Things' is coming nearly three years after the last one or more than two anyway."

Netflix has long held to its all-at-once model because of its subscribers, which it says want more control over when and how they watch content. Shows like "Maid," "Inventing Anna," "The Lincoln Lawyer" and "Squid Game" all held top 10 spots on the streaming service for weeks, showing that Netflix shows can have longevity of viewing on the service as word of mouth travels to new audiences.

Still, Netflix can learn a lot from staggered releases of "Ozark" and "Stranger Things" to determine whether there are other scripted series that would benefit from this strategy.

Pachter suggested that Netflix could take a cue from Amazon and release three episodes a week.

"It's absolutely OK to say, 'We are the disruptor, but there are things our competitors are doing that we admire and we respect them and we think they are doing it right,'" Pachter said. "It's not a cop out."

Netflix's all-at-once release strategy may set it apart from other streaming services, but it also means that it has to increase it output of content to fill the gaps between series. Instead of having, say, 30 shows spread throughout the year, it needs 300, Pachter said.

"Netflix's data dump means that they have to do more content to minimize churn," he said. "I think that they will be far more successful if they focus on more quality than more quantity."

For years, the streaming service used licensing agreements with networks and studios to pad its library with long-running and popular series like "Parks and Recreation," "Schitt's Creek," "Mad Men," and a suite of Marvel-based superhero shows.

Those contracts have ended and the shows are now on other streamers. In another blow, Netflix is about to lose 12 seasons of CBS' "Criminal Minds" at the end of month. "New Girl," another staple in Netflix's collection, is expected to depart the platform in 2023.

"Breaking Bad," "Grey's Anatomy," "NCIS" and "Supernatural" are sticking around for now.

These kinds of series, which have a number of seasons or dozens of episodes, have been a major driver of viewing traffic on the streaming service for years. Now, Netflix is more reliant on its own original content, leaning heavily on content creator deals and surprise hits like "Squid Game" and "Love is Blind."

"Netflix has a lot of content, but the iconic evergreen content has not caught up to the catalogs to the other streaming services that are out there," Cicero said.

Relatively new streamers like Disney and NBCUniversal's Peacock have decades of legacy content to fill their libraries with. It's why Netflix made an agreement to be the first streaming space for new Sony releases back in 2021.

It's also why Creative's Csathy believes Netflix should focus on developing franchises or buying the rights to already established franchises.

"Rather than throwing all the titles against the wall to see what sticks with consumers, focus on franchises and name brands," Csathy said. "The smartest bets are those that have name recognition and built-in audiences."

"Wall Street will reward those that come out with a public strategy of less is more," he added.

Still, there are those that don't think Netflix will be so quick to overhaul its established strategy.

"I think people tend to forget within our industry is that this isn't a one size fits all," said Dan Rayburn, a media and streaming analyst. "I don't think Netflix will say no more binge watching."

Instead, Rayburn foresees the streaming continuing to try new models, like its plans for adding an ad-supported plan to its platform.

He noted that the stark stock reaction is a result of Netflix deriving all of its revenue from streaming. This means that when a show doesn't perform well or the service sees a slowdown in subscriber growth, there is an immediate reaction.

At the end of the day, streaming analysts say content spending will not go down, even with ongoing economic pressures, such as inflation and higher interest rates, and a potential recession on the horizon. Competition in the streaming space will continue to drive these companies to create and distribute more content.

"Where the dollars go will be reallocated is the question," Csathy said. "For Netflix, I think 'less is more' is a strategy that pays off for them."

Disclosure: Comcast is the parent company of NBCUniversal and CNBC.