261 billion dollars was Netflix’s market cap one year ago.
154 billion is the market cap today.
A 41% total drop.

Netflix has lost over 100 billion dollars and where for years, it was compared to Facebook, Amazon, Apple and Google, with them being labeled as FAANG, they’ve now lost a tooth with Netflix.

This loss is believed to be caused by Netflix declining growth, where for the first quarter ever, the company said they’ve lost subscribers.

Just to give a timeline on growth the last five years.

89 million users ending 2016.
110 million users ending 2017.
139 million users ending 2018.
167 million users ending 2019.
203 million users ending 2020.
221 million users ending 2021.

Which does on surface look like steady growth, but 2021 was a bad year, where the first nine months only grew by six million subscribers. The final quarter saw an increase due to holiday marketing and it was expected Squid Game alone could have contributed to over a million subscribers on that.

For 2022 though, the year is off to a bad start, where they lost 200,000 subscribers in quarter one and it’s looking likely that could continue for most of this year.

What caused this is the question a lot of people tried answering.

A lot of people are saying it was a response to being post COVID, where Netflix grew by 40 million subscribers in 2020.

This isn’t a good reason and doesn’t really make much sense.

2017 grew by over 30 million.
2018 grew by 19 million.
2019 grew by nearly 30 million.
2021, which was more or less post COVID grew by almost 20 million.

The real reason is simple and that’s competition.

• Disney+ has 130 million subscribers.
• HBO Max has 74 million subscribers.
• Paramount+ has 56 million subscribers.
• Peacock has 9 million paid subscribers and 25 million monthly users.

The Netflix competitors, which are all pretty young are growing faster than what Netflix grew at and now Disney is projecting to surpass Netflix in 2024, where it said 240 million subscribers is possible.

Disney has 90 million fewer subscribers on Disney+ than Netflix, but also still makes over 2x what Netflix does, due to merchandise, theme parks and other revenue sources.

Netflix which for a couple months in 2020 surpassed Disney in market cap has a bad case for value.

Which there’s a lot of reason these competitors are taking off, but it all comes back to content.

Friends and the Office in Netflix were the two most watched shows in 2019, where it was estimated they combined made up 18% of all streaming total.

To put that in perspective, those two shows, which one ended 15 years prior were getting more monthly streams than Netflix entire original war chest combined.

The model didn’t make much sense relying so much on licensed content and every month, they lose more, while being setback heavily from COVID on original content, where now even hits like Stranger Things are marketing hard to pickup steam from fans again.

Netflix has competition, but I actually don’t even think that’s the biggest reason for the stock crash.

The real reason is ultimately just Netflix was never really part of FAANG.

Facebook
Makes software for websites/apps that connect billions of people.

Apple
Makes phones, headsets, laptops, tablets, has cloud services and more.

Amazon
Massive logistics company selling billions of products monthly.

Google
The largest data company ever, giving people any info they want and about twenty other businesses.

Netflix…
They posted movies and TV shows, using tech any company can do.

There wasn’t a tech company to Netflix, but it was just another media company.

Which Netflix isn’t a tech company, Disney is.

Disney invested so heavily into CGI with Pixar, to the point they can do things almost no studio can actually do.

Avengers Endgame had a smaller special effects budget than Justice League by Warner, but Justice League looked way worse, due to Warner not investing as hard into CGI.

Disney is also way ahead of almost everyone in sound tech, cameras, 3D and animatronics.

People are wondering why Disney is out there making shows like Mandalorian and Netflix really hasn’t had anything on that level.

Reason is they can’t produce something like that.

The big defense for Netflix has been data, claiming they have the best recommendation engine for shows/movies to people, but that’s not really worth much for two reasons.

1. Any software there, a company like Disney or Warner can just easily license from another software company that’d do it better, such as Microsoft or Google.
2. That data edge is likely only due to Netflix users being on there longer and overtime, as people watch more shows/movies on the other platform, they’ll be the same or better.

Netflix biggest issue as a stock is people realizing they aren’t comparable to Apple or Google, but they are a media stock more similar to Viacom.

Which Viacom has a market cap of 25 billion, but made over 25 billion in 2021, where streaming off Paramount+ is now making over 1 billion a quarter for them.

Netflix is less diversified than Viacom, but with 29 billion in revenue has a market cap at 154 billion.

This is the biggest issue for Netflix, where despite hype, it seems like a normal media company and the valuation over the next decade will end up looking more like Viacom and less like Apple or Google.