New York (CNN Business) Netflix has had an incredible 2022. In April, it said it lost subscribers for the first time since 2011. Its shares are down more than 60% this year.
However, its recent struggles may not be the beginning or end of a downward spiral for the streaming giant. Rather, it’s a sign that Netflix is becoming a more traditional media company.
Netflix ( NFLX ) was originally valued as a Big Tech company, part of the “FAANG” Wall Street acronym that referred to Facebook ( FB ), Apple ( AAPL ), Amazon ( AMZN ), Netflix and Google ( GOOG ). A company once valued by Wall Street at around $300 billion, Netflix’s business model ultimately failed to match the numbers of many Big Tech companies.
“I think Netflix was overvalued,” Parrot Analytics director of strategy Julia Alexander told CNN Business. “Unlike those companies that have different tentacles, Netflix doesn’t have many tentacles.”
But Netflix was never a tech company.
Yes, like many companies in the tech world it was based on subscriber growth, but its subscriber growth was built on having movies and TV shows that people wanted to watch and pay for. That sounds more like a Hollywood studio than a Silicon Valley tech company.
Netflix seemed much more than, say, Disney, Comcast, Paramount or CNN parent company Warner Bros. than Discovery. But as those traditional media companies start to look a lot more like Netflix, Netflix is taking a page out of its rivals’ books: it’s starting to run ads and releasing shows over the course of weeks and months. rather than suddenly
Netflix has said that its cheaper ad tiers and restrictions on password sharing could be coming next year. It is partnering with Microsoft ( MSFT ) for its ad business.
“I think in many ways the moves that Netflix is making suggest a transition from a technology company to a media company,” Andrew Hare, senior vice president of research at Magid, told CNN Business. “With ad insertion, a crackdown on password sharing, tentpole shows like ‘Stranger Things’ experimenting with a staggered release, we’re seeing Netflix every day look more like a traditional media company.”
Hare added that Netflix’s previous business strategy, “which was once sacrosanct, is now being thrown out the window.”
“Netflix definitely forced Hollywood out of its comfort zone. They brought streaming into America’s living room,” he said. “Now it looks like some common practices may be just what Netflix needs.”
At Netflix right now, “they’re making a lot of strategic moves as they mature and move to the next phase as a company,” Hare said. This means focusing on cash flow and revenue rather than growth.
“In other words, old-school business,” he said.
— Moss Cohen of CNN Business contributed to this report.
