Editorial: Netflix, a disrupter, gets disrupted itself. Ari Emanuel is shedding no tears.

Chicago Tribune
Chicago Tribune

For anyone owning Netflix stock, a high flyer during the pandemic, this was a gut-churning week. On Wednesday shares of the streaming service giant fell more than 35% in a single trading session and slid further Thursday. In essence, the markets were reacting to news that Netflix was no longer growing its subscriber base, while still spending in profligate fashion on content.

Two nights before the Netflix rout, Ari Emanuel, the CEO of Endeavor and brother of the former Chicago mayor who’s now ambassador to Japan, had addressed the Economic Club of Chicago. Along with telling the usual stories of the Emanuel’s shared childhood in Wilmette, Emanuel made it clear that his company now was in the business of content ownership and creation, not merely old-school talent representation.

As Emanuel sees the future, major talents like his client Dwayne “The Rock” Johnson, with 16 million followers on Twitter, are increasingly able to produce their own content, bypassing the subscription services that bundle their content with others and take the lion’s share of the revenue. Celebrities like tennis pro Naomi Osaka won’t just get paid to endorse products, they’ll acquire equity positions in those products or even make stuff themselves under their own brand.

Emanuel batted away a question suggesting he might be unemployed himself, arguing the contrary: Content creators will still need help from companies like his, but the bundlers likely will get squeezed. Just like the old TV networks.

What happened next made him appear prescient. Netflix, which had helped imperil movie theaters, had been hit with the same revenue-based challenges as other media. Nothing grows forever. Even binge-watching. People only have so much time and money.

On Thursday, in another stunning comedown for streaming, the big-spending CNN+ announced it was canceling itself and laying off staffers, just weeks after its launch.

Streaming services aren’t about to die. For one thing, they profit massively from our lethargy when it comes to canceling something we don’t much use.

But Netflix in particular has learned what the old-school media and entertainment businesses it disrupted had to swallow. Presumed growth doesn’t always translate into actual growth and spending on content has to be aligned with revenue.

Simple lessons. We suspect Netflix now will be a humbler place. As it should be.

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