by Paul Moomjean

paulmoomjean@yahoo.com 

We all watch Netflix or are aware of its contribution to both the economy and entertainment worlds we live in, but for those unaware, it is currently in a dark age unseen. Netflix execs are finding that, with no one required to stay home on lockdown, their empire is crumbling. Plus, after the recent state of the union address, media outlets are creating chaos with their hot takes on the streamer. Two respected news organizations, the Washington Post and Forbes Magazine, have two very different interpretations on the topic of Netflix’s woes. In such an unstable world, we need the media to report correctly, and when we see bias, we must call it out, especially when the financial market is on the line. 

According to Forbes, Netflix is trading at a 10-year historic low valuation and the future is murky at best. The stock was at $600 a share back in 2021. The company was predicting growth and financial gain hand over fist. Instead, the past two quarters have seen large drops in subscribers (approximately 1.2 million lost between the two first quarters) and the stock plummeting.    

Forbes reported, “The lagging discussion on Netflix is that there was a subscriber decline in Q1 of 200,000, excluding Russia and a subscriber decline of 970,000 in Q2. While critics believe this is due to saturation, it’s much more likely the decline is coming from a pull forward due to Covid as all media stocks – both streaming and social media – demonstrated outsized audience growth through Q2 2021. Therefore, Netflix is lapping some tough quarters for audience growth comps.” (“Netflix stock stronger than it seems following Q2 earnings,” Beth Kindig, July 22, 2022.)

What makes all this doom-and-gloom talk so fascinating is that the Washington Post is reporting all of this as a net positive in the long term. Look at how the Washington Post creates a different narrative to protect the streaming giant. (“Netflix loses nearly 1 million subscribers, and its stock soars,” Hamza Shaban, July 19, 2022.)

To wit: “Shares surged 5.6 percent ahead of Tuesday’s release, closing at $201.63, amid a broad rally that sent the Dow Jones industrial average up more than 750 points, or 2.2 percent. The broader S&P 500 index and tech-heavy Nasdaq ended even higher, up 2.8 percent and 3.1 percent, respectively, as investors appeared buoyed by better-than-expected quarterly earnings that showed businesses were managing withering inflation and despite recession fears.”

This lipstick-on-a-pig approach to analyzing the downfall of Netflix’s attempt to take over the world is not healthy to investors. The Washington Post isn’t being honest, because they want people buying stock, not selling. Does corporate America have no soul? Telling people Rome is burning while playing the fiddle isn’t a cure, Mr. Nero.  

Meanwhile Netflix isn’t really being honest or aware why they went from <em>Tiger King</em> to the Pussycat Dolls. According to Forbes, “The company attributed its slowing revenue growth to a range of issues, including higher adoption rates of connected TVs, more streaming competition, account sharing and broader factors like sluggish economic growth and the war in Ukraine.” 

Forbes points out Netflix’s detachment from reality. Yes, the recession and inflation hurt, but at $10-15 a month per subscription, that’s not the reason. And it certainly isn’t the war in Ukraine. Netflix creates too much mediocre content, with about two or three great films a year. Their comedies and action films are awful, and their TV shows are binge worthy, but then you can unsubscribe until something better comes months down the road.  

The Washington Post is reporting “nothing to see hear” headlines, which will only cause confusion and an uptick in a stock that is bound to fail. The small jump in stock is being seen as an improvement: “The new and improved trajectory in free cash flow won’t change the company’s debt levels anytime soon. Netflix is firmly setting expectations for $10 to $15 billion in debt into the foreseeable future. This is necessary to continue to hold its place as the top media company in terms of revenue and engagement. Gross debt stands at $14.3 billion, when accounting for $5.8 billion in cash, net debt is at $8.5 billion.”

When you start celebrating that amount of debt, you’re wearing financial beer glasses, seeing the hot mess at the bar as a real catch. Who knows if Netflix will survive or not. But just know we can’t rely on the media to give us a real, honest analysis. It’s a tale of two Netflix.