The corporate narrative on Netflix has always been high drama. Is the streaming service a savvy disrupter that will live on forever as the first mover of online entertainment? Or is it a house of cards, pushing an unsustainable business model that all of Hollywood foolishly followed?
In the past few months, investors have leaned towards the more steely-eyed view of Netflix’s prospects. Its share price has nearly halved over that time, falling from $700 to $366, wiping away $150bn in market value. At its peak in October, Netflix traded at a multiple of more than 10 times trailing revenue, well above its peers in media such as Disney. Now it is down to 5.6 times.
Normally, Netflix’s rivals would enjoy the schadenfreude. Hollywood executives have long resented the company’s magical ability to lose money and rise in market value. But, instead, the sell-off has been unsettling because all of these companies have copied the Netflix model.