By Frank Pallotta, CNN Business
netflix had a terrible year 2022. In April, he said he lost subscribers for the first time since 2011. His action tumbled more than 60% since the beginning of the year.
Still, its recent struggles may not be the start of a downward spiral or the beginning of the end for the streaming giant. Rather, it’s a sign that Netflix is becoming a more traditional media company.
Netflix was originally considered a Big Tech company, part of the Wall Street acronym, “FAANG”, which stood for Facebook, Apple, Amazon, Netflix and Google. Wall Street once valued the company at around $300 billion — a figure comparable to many Big Tech companies that Netflix’s business model ultimately couldn’t reach.
“I think Netflix was hugely overvalued,” Julia Alexander, chief strategy officer at Parrot Analytics, told CNN Business. “Unlike those companies that have different tentacles, Netflix doesn’t have a lot of tentacles.”
But Netflix was never really a technology company.
Yes, it relied on subscriber growth like many companies in the tech world, but its subscriber growth relied on movies and TV shows that people wanted to watch and pay for. It’s more like a studio in Hollywood than a tech company in Silicon Valley.
Netflix was much more like a tech company than, say, Disney’s parent company, Comcast, Paramount, or CNN, Warner Bros. Discovery. But as these traditional media companies start to look a lot more like Netflix, Netflix in turn is starting to pull a page from its rivals’ playbooks: it’s going to start serving ads and he released a few shows over the weeks and months rather than all at once.
Netflix said its cheaper ad tier and crackdown on password sharing could come next year. It partners with Microsoft for its advertising company.
“I think in many ways Netflix’s moves suggest a transition from a technology company to a media company,” Andrew Hare, senior vice president of research at Magid, told CNN Business. “With the introduction of ads, a crackdown on password sharing, flagship shows like ‘Stranger Things’ experimenting with a staggered release, we see Netflix looking more like a traditional media company every day.”
Hare added that Netflix’s old business strategy, which was “once sacrosanct, is now thrown out the window.”
“Netflix once forced Hollywood out of its comfort zone deep. They brought streaming into the American living room,” he said. “Now it seems some more conventional practices might be what Netflix has need.”
At Netflix right now, “a lot of these strategic moves are being made as they mature and move into the next phase as a business,” Hare noted. This means focusing on cash flow and revenue rather than growth alone.
“In other words, old school stuff,” he said.
— CNN Business’ Moss Cohen contributed to this report.
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