No company has benefited more from the shift in the way people watch television than Netflix Inc. But the news on April 19 that the streaming service had lost 200,000 customers globally in the first quarter and expects to lose 2 million in the second quarter transformed Netflix from the quintessential growth stock into a market pariah almost overnight. The company’s market value plunged by $54 billion, as investors worried about Netflix’s prospects and the limits of video streaming itself. Netflix says it will do everything from cracking down on password sharing to rolling out a lower-priced service with ads, both measures that the company had avoided in the past. We asked Bloomberg News’s media and entertainment writers to help us make sense of this dramatic turnabout.
Netflix’s stock took a phenomenal dive after its subscriber count announcement. Why were investors so suddenly taken aback, given that a lot of the issues–competition, the rising cost of content, saturation in larger markets–were well known?