the money game

What the Hell Happened to Netflix?

Photo: Mario Tama/Getty Images

This post was updated to include Netflix’s share price Wednesday morning.

Netflix was supposed to be the antidote to the bloated world of cable television. Remember back when you had those low gray boxes on your console? You’d click through hundreds of channels, spending a fraction of a second glancing at one low-budget show after another, and feel — after all that — that there was nothing on TV. Of course, there was plenty to watch, but the problem was none of it was good. So when the pandemic hit, things were very good for Netflix, just as things were good for all kinds of businesses that ask you to do nothing more than sit on your ass. But now Netflix is an expensive, swollen monster of a company that’s not very different from its competitors. Why pay $20 a month for a premium subscription when you’re not even sure if that new show you want to watch is Apple+, or Disney+, or Hulu?

How bad are things? Here’s how Netflix put it in its first quarterly earnings report for 2022: “Our revenue growth has slowed considerably as our results and forecast below show.” During the first three months of this year, 200,000 subscribers decided they’d had enough. This is the first time Netflix has lost subscribers since 2011, according to the number crunchers at Bloomberg. And it’s getting worse: Netflix predicts that another 2 million paying subscribers will bolt by the end of June. This is particularly bad in light of the company’s forecast from January that it would add 2.5 million subscribers during the first half of the year — which was considered really bad at the time, even though the company still thought it would be growing. This most recent report caused Netflix stock to crater about 25 percent in after-hours stock trading, erasing about $38 billion off its market capitalization — usually the kind of punch to the gut that’s reserved for people named Mark Zuckerberg. [Update: Netflix shares fell as much as 37 percent on Wednesday morning, erasing about $50 billion from its market capitalization. That’s the company’s biggest drop in a decade, and the lowest point since January, 2018].

Of course, there’s a lot more going on here. Netflix blamed a large chunk of the subscriber loss on the war in Ukraine, since it pulled out of Russia and lost 700,000 subscribers with it. (The company says that if it weren’t for its exiting Russia, it would have added a half a million subscribers — still well below its forecast). Netflix is still huge — it has 222 million subscribers worldwide — but about 100 million households are sharing passwords, with about a third of those in the U.S. and Canada, according to the company. That may end soon, though, as the company pilots more expensive account-sharing programs in Chile, Costa Rica, and Peru. And more than that, the pandemic economy is crumbling under two strains: the fact that people are leaving their homes and the fact that just about everything is getting more expensive.

Maybe we should have seen this coming. Last week, before Netflix published its earnings, the film-and-TV website Screencrush published a weird and funny list about dud movies and shows that had inexplicably become hits around the world, like Blitz, the 2011 Jason Statham vehicle that’s Netflix’s most watched movie in Italy, or Men In Black: International, the one without Will Smith, which was No. 1 throughout the Middle East. And this was before The Slap. As goofy as all that is, it points to another problem: Netflix spent more than $13 billion on original content last year, and people apparently aren’t watching it all that much. Yes, there have been hits, such as Squid Game and Love Is Blind, but there are also shows that are so bad and pointless — like Is It Cake?, a game show where people guess if things are real or are cakes in disguise — that as I watch them I am forced to consider that one day I will die, and I’ll look back on my life and the part of it when I yelled at the screen that no, that’s not in fact a cake. But I still have a Netflix subscription, so joke’s on me.

What the Hell Happened to Netflix?