Elon Musk Is Wrong About Netflix. We Know The Problem.

Key Takeaways:

• The problem with Netflix has everything to do with content.  
• It has nothing to do with wokeness. 
• Streaming TV fans are a fickle bunch, which makes one-trick platforms bad investments. 

My girlfriend and I watch a lot of TV. Much of it is what you might call trashy TV. 

So we know what’s wrong with Netflix (NFLX). 

It has nothing to do with Elon Musk’s latest proclamation on Twitter. 

Elon Musk Is Wrong About Netflix 

Amid myriad news reports on Netflix’s massive subscriber losses, I have yet to come across a meaningful, real-life analysis that connects how you and I actually behave to the investment story (or lack thereof). 

Source: Twitter 

Musk was likely referring to the controversy surrounding Dave Chappelle’s Netflix comedy special, which upset people inside the company, who considered some of Chappelle’s jokes transphobic and homophobic. 

Guess what? 

I was offended. However, I’ll only ever cancel Netflix when they stop offering content I want to watch. 

Endless dead-end browsing makes Netflix unwatchable. Not wokeness. 

Chappelle doesn’t reflect Netflix’s values. 

You can’t simply cancel a subscription because a streaming platform refuses to cancel somebody who offends you. Technically, you can, but why would you? 

I bet you’re like me. If you don’t like Chappelle, you simply don’t watch the guy. 

In fact – and Musk ought to know this – the Chappelle controversy might be the best thing that happened to Netflix in the last few quarters. 

It got us talking about the platform again. 

Netflix Has A Fickle Couch Potato Problem

There’s a reason why HBO Max and Hulu are adding subscribers as Netflix loses them. 

That’s right – HBO Max increased its base by 3 million subscribers – to nearly 77 million – since last quarter. Hulu added 1.5 million subs to 45.3 million. 

Netflix expects to lose 2 million subscribers by summer, after saying goodbye to 200,000 last quarter. 

The best things to binge right now are not on Netflix. Plain and simple. 

• Minx (great, edgy, 70s porn mustache meets feminism thowback) – HBO Max
• The Flight Attendant (season two dropped last night) – HBO Max
• The Thing About Pam (trashy, but can’t stop watching) – Hulu
• 90-Day Fiance (super trashy, but can’t stop watching!) – Discovery+
• Severance (maybe the best show on right now) – Apple TV

Thank us later for those amazing streaming recommendations. 

I could name names all day, but you get the point. 

If you lie in bed at night looking for something to watch like my girlfriend and I do, you probably concluded you only keep Netflix for a couple things. For us, it’s Seinfeld reruns and the return of Somebody Feed Phil and Stranger Things next month.  

Other than that, all we do is browse Netflix aimlessly and complain about the crappy selection lately. 

And that’s really the point – it’s so easy to cancel Netflix and spend time elsewhere, particularly when the plethora of streaming choices elsewhere exceeds our most lofty post-cable TV expectations. 

With inflation biting at bank accounts, consumers will bounce when the selection sucks and resubscribe when a streaming service releases something that gives them more perceived bang for their limited entertainment buck. 

The Bottom Line: Netflix is a one-trick pony. At this point, it’s a pure play on streaming. This makes it a bad bet for investors. You don’t want to invest in companies who operate with a singular offering in a fickle consumer space. 

And it’s not just about loyalty. 

There’s no other part of Netflix’s business that complements or can make up for problems on the streaming side. This isn’t the case, obviously, at Apple or with a company we didn’t mention. Disney (DIS) is more than Disney+, which, for the record, added 11.8 million subs last quarter to reach 129.8 million. 

The real hope if you want to make a long-term bull case for Netflix? 

Advertising. And leveraging this much-anticipated move into something bigger than advertising. This would add another row or two to Netflix’s revenue line items. It could make the stock attractive to investors again. 

It’s something we’ll keep thinking about at The Juice and discuss with you more in the coming weeks.

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