Over the last 6 months, we have seen a 70% drop in Netflix’s stock price, taking its biggest hits in the last few weeks. It was clear this would happen and I will explain why, but first, this begs the question: Why was Netflix so unprepared? Netflix is respected as one of the most innovative and unstoppable tech companies. Often at the peak of success, highly innovative companies pause innovation and halt new product introductions.

Over the last few years, we have seen the number of streaming channels grow massively. Netflix, Prime, and Apple started as the dominant players, along with Hulu, Disney, HBO, Showtime, the networks, sports channels, and more… The writing was on the wall and Netflix marketing should have been fully prepared, as the numbers reflected. Consumers eventually stop paying for too many streaming subscription models as the cost per month adds up very quickly. Consumers start selecting one over the other and the more the number of players, the smaller the share per player. Netflix started the revolution of streaming and binge-watching. But the rest followed very quickly. Netflix’s revenues started dropping slowly and then much more significantly. As this began happening, Netflix had plenty of time to change course. But COVID created an artificial veil over the problem, creating the ‘transient’ large audiences who were binging out of control when we were all locked up. Netflix needs to figure out its next play. By the way, the exact same thing will happen to other networks, who hopefully can take a page from Netflix’s playbook and plan ahead. Consumers don’t drop off overnight.  Maybe a sign of complacency?

If any company can, Netflix can re-invent itself. This is the same company that cannibalized its own physical DVD shipment to pave the way for streaming. Now it needs to find the next pivot and do so quickly. What do you think?

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