Netflix lost 200,000 subscribers last quarter. The stock dropped 35% in a single day. Reed Hastings is now talking about ads. The content-at-all-costs model is showing cracks.
And honestly? I've been waiting for this moment. Not with glee, but with the resigned satisfaction of someone who's been saying "that treadmill is unsustainable" at dinner parties for two years while everyone looked at me like I was being dramatic.
Here's what happened to Netflix in slow motion: they built their brand on being the antidote to cable. No ads, no schedules, no contracts, endless choice. Revolutionary in 2012. Table stakes in 2022 when you're competing with Disney+, HBO Max, Hulu, Paramount+, Peacock, Apple TV+, Amazon Prime, and whatever new service launched while I typed this sentence.
When everyone has your core differentiator, you don't have a differentiator anymore. You just have a library. And libraries compete on one thing: content. Which means you have to spend more and more to produce more and more, creating a volume play that degrades quality over time.
I think about this in brand terms constantly. Netflix's original brand promise was curation. Remember when the algorithm was the product? When the recommendation engine was so good that you trusted Netflix to know what you'd love? That was a defensible moat.
Then they pivoted to volume. More originals, more markets, more content, more noise. And the recommendation engine drowned under the weight of it all. Now scrolling Netflix feels like standing in a Costco aisle with 47 options for olive oil. Paradox of choice, meet my Sunday night.
A brand that tries to be everything for everyone ends up being nothing for anyone.The ad-supported tier they're discussing is particularly fascinating. Because it means admitting that the core brand promise (no ads, ever) was a luxury they can't afford. They're about to do the one thing every brand strategist will tell you never to do: break their foundational promise to their most loyal customers.
What should Netflix do? I think the answer is painful but clear: get smaller. Get more selective. Become HBO, not a warehouse. Stand for quality over quantity. Let some customers leave for the cheaper, broader options, and build deeper loyalty with those who stay.
That's a terrifying strategy for a publicly traded company optimized for subscriber growth. But growth-at-all-costs got them here. Maybe it's time to try something different.
Meanwhile, I'm two episodes into Severance on Apple TV+ and it's the best thing I've watched in a year. Which kind of proves the point.