Investors alarmed as streaming services lose their magic touch

theguardian.com:

The end of the pandemic-fuelled home entertainment boom that has driven record breaking growth for Netflix and its rivals has revealed an uneasy truth – the streaming revolution has peaked.

The market is facing a perfect storm as, after a decade of making easy converts, streaming companies are seeing dramatically slower growth and increasing competition fuelling an unsustainable content war, just as stretched household budgets prompt consumers to start cutting back on entertainment services.

Rolling global lockdowns provided the perfect conditions for stratospheric growth. Netflix added a single-year record of 37 million subscribers in 2020, and newcomer Disney+ hit 100 million in 16 months, a feat its rival took a decade to achieve. Rapturous investors sent the market values of both companies to all-time highs late last year.

Netflix bumped back to earth last month, forecasting just 2.5 million new subscribers globally in the first quarter, its worst start to a year in over a decade, and confirming that last year it added the fewest subscribers since 2015. Rattled investors, focused on subscriber growth, have wiped almost $300bn (£220bn) off the combined market value of the two giants since last year’s highs.

Netflix has traditionally acted as a bellwether for the industry, and its worrying growth slowdown – on the heels of its self-proclaimed strongest content slate ever, with record setters Squid Game, Red Notice and Don’t Look Up – raises questions about the future for peak streaming. Analysts at MoffettNathanson, long-time Netflix sceptics, said the forecast was “worrying” for the rest of the industry.

Netflix’s once-revolutionary binge-watching model, the source of much head-scratching by traditional TV companies, is