"Squid Game" can't move Netflix?

The US stock market has fallen three times in a row, and the shareholders who bought Netflix should be the most miserable. Yesterday, after hours plunged 20%, Netflix shares came to $400. In mid-November last year, Netflix broke through the $700 mark.

At that time, the boom set off by "Squid Game" had not yet dissipated, and the entire market was immersed in a beautiful imagination of the future of Netflix, and Damo directly called it a "global money-making machine". In the blink of an eye, the trend has taken a sharp turn, and it has been tragically cut off by the navel.

The first time Netflix's stock price stood at $400, it goes back to June 2018. The increase of three and a half years intermittently returned to its original shape in just two months.

What happened in between?

01 Success is also Xiao He, defeat is also Xiao He

From the inside, Netflix is still the same Netflix, without the slightest change.

There are many global streaming media, although the volume is very different, the types are different, but there is only one iron law that applies to all platforms forever, that is, "content is king".

This is also the most powerful weapon for Netflix to kill a bloody road under the siege of strong enemies.

From the two indicators, you can see why Netflix is doing well with content.

The first is the heat. Since the explosion of "Squid Games" last year, it is not enough to take other examples to illustrate how amazing miracles Netflix mode can create.

"Squid Game" is Netflix's first episode with more than 100 million views, and it has set a new record in less than a month after its launch.

The last time there were literary and artistic works that quickly and enthusiastically spread around the world, it seems that it is still "Gangnam style", which is really worthy of being a cultural south Korea.

This is followed by awards. Netflix won 44 trophies at last year's 73rd Primetime Emmy Awards, including 12 of the main prize 27, making it the biggest winner in Emmy history.

The Status of the Emmy Awards in the television industry is equivalent to the Oscars of the film industry, and Netflix also made the most of the oscars in the same year, winning 7 small gold people in 35 nominations, overshadowing all the big Hollywood studios present.

The double harvest in popularity and awards shows that Netflix has made good achievements in both aspects under the premise of taking into account both business and art.

It is also for this reason that Netflix surpassed Disney last year to become the world's most valuable entertainment company.

As for why it fell, it can only be said that it is also Xiao He who failed and Xiao He, and Netflix's way of success hides the "bane" that it cannot solve.

An attentive reader may find that all of Netflix's major achievements seem to have been achieved in these two years. This is a delicate point in time, I believe everyone should already have the answer.

Before 2020, Hollywood Disney ate meat, Warner, Sony and drank soup, and everyone guarded the ticket warehouse of more than 11 billion in North America. On the other hand, Netflix's revenue in 2019 exceeded 20 billion, which is still good.

Netflix has increased its investment in the content side year by year at its own pace, but the epidemic has stimulated new users and views of streaming media on the one hand, and on the other hand, it has overturned the rice bowl of traditional studios and theaters.

In 2020, the North American box office plummeted by 80% and remained for only $2.2 billion. In the autumn of critical survival, Netflix will have to face sooner or later, but should have more time to prepare for the streaming media decisive battle broke out ahead of schedule.

Source: Comsco

In November 2019, Disney launched its streaming service. A year and a half later, The total number of subscribers to Disney+, ESPN+ and Hulu has exceeded 170 million, not far from Netflix, whose streaming service has been online for more than 14 years.

Netflix ate the dividends of the epidemic, but it also became the dividend itself. In the field of streaming media, Netflix started out the best at the beginning, but it may not be the final winner. No way, the bottom of the house is not thick enough.

Look at the star-studded IP behind Disney, Marvel, Star Wars, Avatar, Pirates, Princesses, and Animation. This is the difference between the rich generation and the rich second generation, desperately chasing the barbarians for half a lifetime to stand on the same running line, don't blame people for laughing:

Brother, I'm just about to exert my strength, how did you fall down?

02 Wounded enemy 1,000, self-inflicted 800

Netflix's strategy to maintain its status as the "king of streaming media" is actually not complicated: win by quantity, and king by quality.

In 2013, Netflix's first self-made drama "House of Cards", five years after its transformation into streaming, was launched, which brought 3 million members and 18% year-on-year revenue growth.

Netflix knows the taste of the marrow and has since carved "quality as king" into DNA.

As mentioned above, Netflix's all-round transformation and increasing popularity in China are after 2020.

But in 2018, Netflix has already beaten Emmy-winning general HBO for the first time with 112 nominations. In 2019, HBO returned to the light with the afterglow of "Game of Thrones", and the next year it was once again surpassed by Netflix and made history with 160 nominations.

In the same year, Netflix raised 24 Oscars, more than double the total nominations of all Disney's film companies. In 2019, Netflix's Oscar nominations were 15, and "Roma" won 3 awards for best foreign language film, best director, and best cinematography.

Before last year, the Korean drama "Kingdom" produced by Netflix, the Japanese drama "Naked Director" and the American drama "Rear Wing Abandoned Soldier" have accumulated sufficient potential energy around the world, which has the outbreak of "Squid Game".

The most expensive British drama in history, "The Crown", swept 7 Emmy Awards

The development context of Netflix over the years clearly writes that "quantity is the foundation of quality, and quality is the elevation of quantity". All those that are adapted to local conditions on a global scale can be explained by it.

For example, buying the copyright of "Water Margin" and "Three-Body Problem" in China, opening a Tokyo animation production base in Japan, shooting zombies in South Korea, shooting spirits in Thailand, and shooting at the court in the United Kingdom.

This is both a kind of helplessness, saying that the good point is that he can attack the jade of the mountain, and saying that the ugly point is that it is not enough to be born, and the day after tomorrow comes together. If Netflix also has its own Kunshan Treasure Jade, why bother collecting IP all over the world?

In addition, this is also a radical "colonialism".

Netflix boss Reed Hastings believes in a "performance is king" management approach, in short, employees can take as many vacations and spend the company's funds as they want, as long as they can create value, they will be paid accordingly.

Netflix founder Reed Hastings

This relatively free corporate culture makes Netflix's employees as happy as the second highest in the United States, and it is also the premise that Netflix can produce a large number of works every year.

But sustaining this "cultural colonialism" requires a steady stream of money: more blockbusters, therefore more subscribers and revenue, and then more money to produce.

In 2020, Netflix's annual revenue was nearly $25 billion, and its profit was only $2.8 billion. According to previous disclosures, Netflix is expected to invest $17 billion in content production in 2021, compared with $5 billion in South Korea alone.

"Squid Game" proves the cleverness of Netflix's business model: 12 million yuan is invested in a single episode, with a total investment of 110 million yuan. 100 million investment for 100 million clicks, and then converted into a large number of new subscriptions and rising stock prices, very cost-effective.

The only downside is that Netflix can't mass-produce Squid Games, while Disney can make superheroes. After Disney, Warner, Amazon, Apple and other heavyweight players entered, the unstable shortcomings of Netflix's "human sea tactics" were exposed.

Therefore, last night's news that "Netflix expects the number of paying streaming users to increase by 2.5 million in the first quarter, significantly lower than the increase of 6.26 million expected by analysts" will make the market panic so much:

The most important gear is wrong, how else does this machine work?

03 The mountain rain is coming, and the collapse is withdrawn

After Disney and Apple entered, the increasingly fierce streaming media war made Netflix lose confidence in the user growth in the first quarter, but investors may not give up the king of streaming.

The reason is very simple, the slowdown in user growth violates Netflix's business logic of "high investment, high return", but as long as there is another "Squid Game", it can break all doubts and pessimistic expectations.

In film and television stock investment, the biggest uncertainty is who can become a blockbuster. For example, in last year's Spring Festival file of "Hello Li Huanying" and "Tang Detective 3", who could have predicted that the first cross-border sketch actor pulled out the strongest dark horse in history?

For Netflix, the situation is a little more optimistic.

For example, at the end of last year, Netflix launched two big productions "Red Notice" and "Don't Look Up", the former has a budget of up to 200 million US dollars, and the latter has a more luxurious lineup, and the film remuneration of small plums alone is 30 million US dollars.

Both films received a lot of bad reviews on Rotten Tomatoes, but they also contributed super high ratings to Netflix. This is the advantage of streaming media over theaters: it relies more on topicality than word of mouth.

Try to see several superhero movies launched by Disney + this year, and the reviews are not satisfactory. Therefore, as long as Netflix continues to adhere to its own strategy, it is absolutely no problem to get its own share of the cake in the market.

The reason why the market seems to have suddenly lost confidence in Netflix is actually another reason.

From its listing in 2002 to October last year, Netflix's stock price rose more than 500 times, ranking in the top ten of all companies in U.S. history to rise after 18 years of listing.

Observing Netflix's share price performance, it can be seen that the steepest segment occurred from the end of 2019 to the end of 2020, which is quite consistent with the trend of the NASDAQ index.

In addition to the favorable factors that the epidemic has increased the length of people's streaming media viewing time, the impact of the rising tide of US stock liquidity on the soaring stock price of Netflix is more direct.

However, the soil that nourishes Netflix's stock price to thrive is quietly draining its moisture.

On Wednesday, the U.S. 10-year Treasury yield stood at 1.9 percent for the first time since before January 2020. Fear of employment and economic slowdowns has ceased to be a good reason to slow down the pace of water harvesting.

In addition, the US stock market that has been going north in the past two years due to flood irrigation has reached an absolute high, and the Fed's monetary policy has exceeded expectations to "turn eagle", and the US stock market is likely to have a sharp correction earlier than people expected.

Moreover, the previous strong rise is likely to evolve into a panic stampede plunge.

As early as early 2021, Grantham, the founder of the hedge fund GMO, warned that the bursting of the epic bubble in the US stock market would become the biggest investment failure in many people's lives.

On Thursday, the 83-year-old value investing giant declared again: "We are currently in the midst of a super bubble of 2000 and 2008.

Whether Grantham's prediction came true is not yet known, but the collective decline of the three major US stock indexes for the third consecutive day has made many people pessimistic:

The historic crash may have begun.

04 Conclusion

Last year's most popular Netflix drama was of course the phenomenon-level "Squid Game", but compared to the discussion of the former, the second most popular "Battle of Two Cities" is obviously not out of the circle on a global scale.

The total play time of "Battle of Two Cities" on the Netflix platform is 120 million hours, and the squid game is 2.1 billion hours. We can make a big guess based on this data: the explosion of "Squid Games" may just be an accident that cannot be copied.

But Netflix is also helpless, after losing the lack of big IP because of the ratings of the killer "Friends" copyright, immediately putting the sequel production plan of the explosive series on the agenda is the best decision it can make.

Netflix's plunge is not independent. In addition to the recent sharp rise in the stocks of Microsoft and Activision Blizzard, most of the other entertainment companies are also following the decline. From the audience's point of view, we certainly hope that Netflix can get through the recent difficulties.

After all, for the literary and art world, it is much better to have a hundred flowers bloom than to run amok by trusts. There should be many people like me, compared to South Korea's "Squid Game", more looking forward to seeing China's "Three-Body Problem".

This article originated from Grand Gateway