Wall St. slaughter hits a suddenly mediocre Netflix as CNN+ perishes

2022 has not been good for Netflix, with 2 million subscribers expected to ditch the once-mighty streaming service in the second quarter of this year alone, according to company estimates.

On Wall Street, it’s been even uglier for Netflix. It had already lost 42 percent off its high going into this week, with another 35 percent lost in one day alone on Wednesday ahead of earnings. We haven’t seen a tanking like this for a company so beloved by investors perhaps since Enron. The Wednesday daily share price fall of 35 percent marks its biggest drop in almost a decade, slashing $40 billion off its market cap alone.

So, what’s going on here? In 2021, Netflix won more Emmys than any other network or platform (44 overall). But the competition continues to increase courtesy of services with heavyweight companies behind them in the form of Disney, HBO Max, Apple TV, Amazon Video, NBC’s Peacock, Paramount, Hulu and Sling, among many others. The market is suddenly flooded with content.

Conditions on the ground are changing quickly as well. Check out these headlines as COVID-19 sent the country into lockdown two years ago.

“Netflix gets 16 million new sign-ups thanks to lockdown” — BBC

“Netflix Traffic Hits All-Time Highs Amid Coronavirus Pandemic” — Forbes

“2020 global streaming subscriptions top 1 billion amid COVID” — Los Angeles Times

But in addition to oversaturation and too many choices, people are getting out in droves as the COVID-19 pandemic recedes. The major airlines are announcing record-breaking ticket sales despite higher prices due to fuel costs.

“The demand environment is the strongest it’s been in my 30 years in the industry,” United Airlines CEO Scott Kirby shared in a news release last week. “We’re now seeing clear evidence that the second quarter will be an historic inflection point for our business.”

More folks are going to restaurants, sporting events and parties. Streaming services in 2020 and 2021 were no longer seen as a luxury but as a necessity. Months of lockdowns and limited options with sports being canceled or weird to watch (thanks to those fake fans in the stands) made binge-watching almost a necessity for sanity. Netflix stock, once at $265 a share in 2018, roared to more than $600 near the close of 2021. It’s now given almost all those gains back in the first four months of 2022.

The company now says it is looking into placing ads on the platform for the first time, after swearing it would never do so when selling it at its inception. Netflix also increased subscription fees earlier this year.

The latter may also be fueling the exodus more than the company anticipated. Inflation is at a 40-year high. The Biden administration continues to signal to the public that it has no answers for it, except to spend trillions more while blaming inflation on Russia’s invasion of Ukraine and COVID-19.

“Let’s be absolutely clear about why prices are high right now: COVID and Vladimir Putin,” President Biden tweeted recently.

But folks on the ground, particularly those in the lower and middle classes, know these aren’t the reasons their budgets are squeezed. Or maybe they don’t care why it’s happening. Either way, the luxury that became a necessity in streaming has become a luxury again. And perhaps more than a few people are saying to themselves, “Maybe I don’t need seven streaming services anymore.” It’s about making choices when living paycheck to paycheck, and when gas prices are above $4 on average when the price was $2.30 entering the pandemic and when the cost of everything from food to home heating costs hits all-time highs, the luxuries in many households get eliminated.

Netflix also has more limited content options now that major studios such as Warner Brothers and Paramount have their own streaming services to provide content to. Netflix looks increasingly desperate to find the next big show that everyone is talking about, the next “House of Cards” or “Ozark” or “The Crown.” Recently, the company signed David Benioff and D.B. Weiss of “Game of Thrones” fame to a $200 million contract. This comes after the pair had already signed with Disney to produce (yet another) “Star Wars” trilogy, so it’s unclear how much time Benioff and Weiss will have given that mammoth lift with Disney. 

The swift death of CNN+ also showed that pouring big money into a product doesn’t guarantee results. That offering launched on March 30. New CNN management announced its will be shut down for good on April 30. Total cost: somewhere in the $400 million to $500 million range. For some strange reason, consumers didn’t see a need to pay to watch those on a network relatively few are watching for free. 

Netflix and CNN+ had a no good, horrible, very bad week. Streaming once looked to be a sure bet. Now the pool is overflowing while content continues to be less and less enticing. 

Can the industry survive? Of course. But not without more casualties along the way. 

Every industry has a correction phase. We’re witnessing it on the streaming front. 

Joe Concha is a media and politics columnist.