The Worst May Be Yet to Come for Netflix
There’s a long road ahead for the streaming giant as new competitors, including your phone company, step up
By any measure, Netflix is a smashing success. Launched in 1997 as a mail-based DVD rental outfit, the company now streams video on demand to 151 million users worldwide every month. Once just a small thorn in the side of traditional cable giants, Netflix now serves more paying video consumers each month than Comcast, DirecTV, and AT&T, combined.
But things are only going to get tougher on Netflix from here. One of the company’s biggest threats? A telecom sector quietly laying the groundwork for revenge.
For years, big telecom has viewed Netflix as a mortal enemy because the company has steadily eroded the sector’s biggest cash cow: traditional cable TV revenue. Instead of embracing head-to-head competition, telecom lobbyists often try to undermine Netflix in other ways, like a recent AT&T proposal demanding Netflix be taxed by the FCC — with the resulting money given to internet service providers.
Telecom’s biggest lobbying win came when the sector convinced the government to not only kill net neutrality protections, but erode much of the FCC’s authority to police anti-competitive behavior in the space. Depending on an ongoing lawsuit, this could open the door to telecom giants like AT&T utilizing all manner of dirty tricks to undermine competitors like Netflix, from throttling a competitors video quality, to imposing arbitrary surcharges if you use a competitor.
But telecom’s lobbying domination of Washington, D.C. is just one small part of Netflix’s newfound worries.
According to Netflix’s latest earnings report, the company lost 130,000 subscribers last quarter, its first subscriber loss in eight years. And while Netflix added 2.7 million paid customers worldwide last quarter, that was roughly half of what Wall Street expected.
The news sent Netflix stock plummeting 13% on July 17, obliterating $16 billion in market value in a flash. And while the company’s stock price has edged back up slightly, some investors have since filed suit, angry over Netflix’s growth projections, and worried the $15 billion Netflix is spending on…