[noio]

The fact that subscriber growth slowdown is a reason for panic, is the reason that so many cool products and startups get worse over time.

Why not take the revenue they have and provide a good, sustainable service for that income? Why does it always have to be growth or bust?

[Traster]

This is a very natural phenomenon, and there's an obvious reason. When you're a growth stage company you're valued as a growth stage company, your Price:Earnings ratio will be high, because investors are already pricing in the future earnings. As your growth slows your P/E ratio drops because investors no longer expect your earnings to go up. This is fine, it's the natural process when you're saturating your market. But it causes all sorts of problems - all your engineers are paid in stock for example, and now they're underpaid versus the industry. That's fine, you don't need the same quality of engineers when you've dominated a market. You've built the thing. It's done. Let them go and build the next thing.

But the engineers aren't the only ones who are paid in stock - so are all the executives. And they want money! So you must keep the growth up. So at this point you do what Netflix is doing - start exploring other markets that you can use your existing skills to dominate. Now most likely that will fail, because by nature, you're taking the money from the home run you hit and betting on hitting another even bigger home run. For every 1 Netflix there were 10 failed competitors. But Netflix now has to try and be another Netflix, but will most likely spend their money creating 1 of those 10 failed competitors.

[bborud]

There is actually another way: become more. Google and Amazon are companies who kept growing because the scope of what they did kept growing. And they kept getting better at what made them big in the first place at least for another decade. Go back 20 years in time, and Google was a search engine. Today they are much, much more than that. Go back 25 years in time, and Amazon was a book store.

Netflix is just a movie service. And it is a movie service that hasn't gotten any better for a very long time. The fact that I have to spend a lot of time finding content to watch and Netflix mostly showing me the surface layer of content over and over again is extremely frustrating. It just isn't a good experience. They are about as frustrating as every other service on the market because they deliver an experience that isn't anything special: it is just as bad as every other competitor.

If they have no ambition to deliver a better service than everyone else, then why would they attract more users, and more importantly, have more users pay more for their service?

Right now Netflix is an acceptable service, but nothing more. They still have some way to go on quality. And if they started becoming the company that dares to do things a bit differently, and to do things better, this could be a platform to launch into other areas.

[sdevonoes]

> And they kept getting better at what made them big in the first place at least for another decade. Go back 20 years in time, and Google was a search engine. Today they are much, much more than that. Go back 25 years in time, and Amazon was a book store.

Perhaps you picked up two bad examples. Google search is worst than ever (for their users ofc, not for the ones who get money out of it). My experience as a customer in Amazon is equally bad: bad quality products (I have to spent hours filtering and double checking in order to say "yes, that's the item I want"), reviews over 4.0 that nowadays mean nothing, intrusive ads everywhere (e.g., I searched for boots in Google image search, and suddenly all the ads in other websites are about boots sold at Amazon).

I used to trust Google (I bought domains from them, used Gmail, I even bought their Nexus 5!), but not anymore precisely because how big they have became: almost-zero human customer support, they can ban you anytime they want and give you zero reasonable excuses.

[Semaphor]

> Google search is worst than ever

> My experience as a customer in Amazon is equally bad

But is that generally the case? From what I hear, non-tech people still love google (the vast, vast majority of people) and my personal experience with Amazon is pretty decent as well (though I’m not in the US, so maybe it’s not as much of an issue here) despite their search being bad.

[Ntrails]

> my personal experience with Amazon is pretty decent as well

Considering the endless dark pattern manipulation to get people signed up for Prime etc, the intolerably bad search, the hard to manage/judge "sellers", the god awful semi storefronts within a storefront from actual brands etc etc.

It is just not low hassle anymore, at every stage I'm paying extra attention lest I'm getting screwed. Turns out I'd rather go to a bookstore or a hardware store or whatever at this point. Even accounting for travel time it's lower stress.

[Semaphor]

I’ve been a prime customer ever since Prime became a thing in Germany, so I can’t talk about that. Search I already agreed (though it’s not intolerably bad, it’s barely worse than google), but the rest I have no issues with, I can see who sells what and I don’t even know where to find storefronts, all my buying is done by searching for the products or finding deeplinks.

[Retric]

I have heard non tech people starting to complain about both Google and Amazon significantly more.

[bborud]

...hence "at least for another decade" :-)

[Traster]

Yeah this is what I mean by hitting another home run. I think Amazon has truly successfully done this multiple times. Apple has done this to some extent - although they haven't really gone far past their core expertise. Google and Facebook not as much, they just happen to have businesses with massive total addressable markets that cover for all manner of sins.

But is that even the right thing to be doing? I'd argue Netflix would be doing a hell of a lot more for it's share holders to take the profits from the successful business they've built and hand it back to shareholders, rather than start gambling that money on building new businesses that are unlikely to succeed. This is what's happening right now with Facebook. It's a social media company gambling share holder cash on becoming a completely different business with almost 0% chance of success.

[hackernewds]

Great companies are not just defined by their products. Example for Google and Amazon is to illustrate that they've built a _system_ (consisting of brand, culture, values, etc) that can explore, prototype and execute in multiple different areas from scratch, and without being first to market.

[gcthomas]

Google has grown by using ad revenue to buy comoetitors or companies that do something interesting, then squeeze them for every penny of profit or dump them.

Google has a dominant search engine, a browser and massively intrusive ad placement system threaded through everything they offer. Gmail was a Hotmail clone. Android, Fitbit, Maps, Nest, and Google Earth were acquired. YouTube was bought after it out competed Google's offering. Even the advertising tech was acquired, with AdMob, DoubleClick invented outside Google.

They are dominant mostly because they have not been bothered by antitrust actions. That, at least, looks like it might happen sometime relatively soon.

[extra88]

Netflix's growth for a while has been in not just licensing TV and movies to stream but to become a studio producing TV and movies to stream (and even to show in movie theaters). They've also grown in the TV categories they offer (through production and licensing), like unscripted "reality" TV and anime. If you don't value their growth, you're not likely to give them credit for it.

They are also working on growing into at least one new area, video games.

[KoftaBob]

Well said. I would've rather seen Netflix continue their revenue growth by expanding into other verticals, rather than by continuously increasing their monthly price, which in my opinion is a very uninspired/lazy way of increasing revenue.

If anything, one of the best forms of competitive market capitalism is when a company that's successful in one sector, invests in entering a new one, thereby adding competition to whatever that new sector is. Shareholders get more growth out of the company, consumers in that sector get more competition for their $, win-win.

[Overtonwindow]

Maybe this is because Netflix is a publicly traded company? with similar publicly traded companies, there is always a constant pressure to push up the value, and earn more money. Maybe they should take it private

[dgb23]

> That's fine, you don't need the same quality of engineers when you've dominated a market. You've built the thing. It's done. Let them go and build the next thing.

> But the engineers aren't the only ones who are paid in stock - so are all the executives. And they want money! So you must keep the growth up.

This might be why so many (not all) great software services and products eventually turn into crap. They start out focused and well made, caring about their users and workers. Then the owners and decision makers try to squeeze everything out of it and carelessly add bloat, while "optimizing" internal processes into oblivion. And all that because some people simply cannot get enough stuff, is a business' goal always to extract value and power for the few despite already having massive market share, a good name and happy customers?

There is another path: invest in the long term by putting workers and customers first. Give back, invest in R&D, education, open source, social stability, the _quality_ of their product, growth of their workers and relationship with their customers.

If this was the common path of successful companies, we would live in a different, fairer, more sustainable advanced society.

[xavxav]

Sure, but as I'm sure you're aware, the current system makes this model impossible for all but the most niche products: a faster growing, better funded (because they are growing faster) product will outspend you until you die. The existing VC model is hostile to 'slow growth' companies and products.

[cardamomo]

Then change the model!

I see the value in your point--it reflects our current reality--but we should never lose sight of the fact that we can replace systems that don't serve our best interests. Yes, it takes hard work, but maintaining the status quo is not the only way forward.

[infinitezest]

I mean fair enough but isn't that the problem? That people would like to change the system but the exact mechanism for doing so is not at all obvious.

[falcolas]

Based on the earlier comments, it feels like step 1 is to renegotiate salaries away from stock. It makes sense when you can't afford reasonable salaries, but it's not something that's been written in stone.

Also, don't hire executives who have a demonstrated history of making bad decisions for a business' long term stability in the name of "shareholder value".

[johnfn]

No, not really. If you change the model you’ll immediately be out-competed by anyone who didn’t change the model.

[dgb23]

It's not impossible in a real sense. Many SMBs do this, large players do it somewhat sometimes in some areas and have proven this strategy to work on some level. I want _more_ of that and I think it would be better for pretty much everyone in the long term.

My comment above isn't nearly as nuanced as it could be - I'm pressuring a pain point that I think needs more attention. But I'm optimistic, It seems like sustainability awareness and long term, holistic / system thinking is growing.

[orzig]

I was at a company whose P/E was super high as we saturated our market. The CEO would publicly state that the price didn't make sense to him, and we tried to find more home runs. In the end, inevitably slowing (but still positive and profitable!) growth caused a panic and investor-mandated layoffs.

I'm sure it could have been handled better, but elegantly transitioning out of hypergrowth is a surprisingly hard problem, even when you recognize it as such.

[darkr]

> all your engineers are paid in stock for example, and now they're underpaid versus the industry.

I was under the impression that Netflix generally doesn't offer stock to engineers, but instead pays above market salaries.

[sudden_dystopia]

This is not a “natural phenomenon”. It’s a phenomena that is a result of being a publicly traded company since investors demand growth. Stay private and you can set your own goals. Growth has to end at some point other wise public companies are really just little “Clippies” optimizing for growth and destroying everything in its path.

[throwanem]

You use the word "nature" and its cognates surprisingly frequently in this description of an entirely artificial set of processes.

[pembrook]

If you want to quibble the semantics, we can take this even further.

I’m not sure if you’re aware, but humans are of the biological class mammalia. We are nature.

If we’re nature, then everything we do is natural.

Unless you want to enshrine Netflix’s market position in law, Companies, like species, will always compete with each other.

Companies in our civilizations, like species in our forests, will expand until the limits of TAM or outcompetition by a predator company.

[throwanem]

When you need to define the concept of artifice out of existence, and hope your audience fails to notice, in order to sustain your argument, what does that say about the argument?

[pembrook]

And thus, we have reached the logical endpoint of semantic debate, ie. no longer confronting the underlying ideas in GP's comment.

If you replace the word "natural" with "artificial" in GP's comment, it doesn't change anything about what he/she was saying.

[c0nducktr]

I wonder that so often, and the answer I find myself landing on is... greed.

It's greed. Investors want to make more money, they don't care about the product, or the experience in using the product. They just want more money. That's how the whole system is set up. It's sadly just how it is.

[EnKopVand]

I think it’s a little unfair to call it greed because of how the world operates. Dumped down a little the path for a successful company in the west is to have founders create a small company with a great culture that cultivates growth through a great product. Eventually bigger capital notices the rapid growth and invests, typically letting current and coming employees buy options at the same rate they do because they want to keep the culture until the IPO. Eventually the company has grown enough that it is now a large or even enterprise company while skipping all the steps in between because of the rapid growth, and with all the challenges that come with the that, and then the IPO launches. Talented capital will launch lower than they could, so that they can IPO at 100 and then truly sell out at 400-500 (made up numbers to give you the idea) a couple of years later where the company becomes a truly public company.

During those years the founders and much of the talent are very likely to leave the company. Partly because working for an enterprise wasn’t what they signed up for, but mainly because the rapid growth has likely stagnated, which means that you can get so much more out of your time building something new.

Your time is limited and how you get to spend it is directly tied to your wealth. Why would you waste either on something that doesn’t grow when you could be growing your wealth 40% a month on something else?

Maybe it’s greed, but it’s also how you play our system.

The only weird part about it all is why we aren’t teaching children financial impact and how to maximise it in schools. I mean, I had no idea how rigged the world is until we had our first million (in Danish KR, so around $150k). Simply being able of putting down 30% on the loan for our house ourselves means that we have around 10k DKK ($1500) more to ourselves, every month, compared our friends who are similar places in life minus the start capital and thus are paying those $1500 directly into the banks pockets.

[sudden_dystopia]

You don’t see the negative externalities of thousands of start ups growth hacking just so that they can IPO? And thousands of already public companies hacking growth to stay publicly traded?

Or do you just not want to see it?

[EnKopVand]

If you’re asking me if I know that the world isn’t fair then I hate to tell you this, but I feel a lot more guilty about the shady supply line that led to me being capable of writing this reply on my iPhone than of any work or investment I’ve ever personally been involved in.

That being said, I don’t agree with the sentiment that a company needs to “growth hack” to go from startup to successful IPO. It obviously happens, but a lot of companies succeed by selling something that is actually useful. It may not be as glamorous as working for a FAANG company, but you can make a pretty decent career out of helping non-tech companies scale beyond excel sheets.

[asoneth]

To be fair, it's not just investor greed that does it.

Plenty of good managers and engineers just want more money too. Once the hyper-growth stalls, many early employees cash out their lottery ticket and leave to take higher-paying jobs elsewhere. They don't care as much about maintaining the product and experience that they built as they do about making more money.

(And this is exacerbated by the fact that many people prefer building new things than to maintain the existing things they built.)

[addandsubtract]

Greed is just the byproduct of uncapped capitalism. Disincentivise the pursuit of constant growth, and the world would be a lot less evil.

[rosndo]

> Disincentivise the pursuit of constant growth, and the world would be a lot less evil.

Not only that, but perhaps the world would be a lot less.

[seti0Cha]

You're going to have to do some work to establish that. It's pretty clear from the historical record and from ancient literature that greed predates capitalism by millennia. You could argue that capitalism makes it worse, but I don't see much evidence of that in history.

[panick21_]

> Greed is just the byproduct of uncapped capitalism

No its a byproduct of human beings.

> Disincentivise the pursuit of constant growth, and the world would be a lot less evil.

Or actually it would be much worse.

[hetspookjee]

I think it’s the tragedy of public traded companies that eventually there’ll be such an overwhelming demand from the shareholders -given that they often hold a majority combined to just the directors- to monetise and provide dividend and/or a raising share, that they must go below the belt with tactics, like letting go of the initial core values.

If they do not do so, odds are big - but no given - that a competitor with a enormous bag of VC money might enter the scene and subsidise the losses like any other platform gameplayer does these days, that might undercut the incumbent in quality and slowly but surely garner enough market share to start flipping the coin, and the process either resets itself or doesn’t.

One must be constantly on top of the game to remain at the top, being handicapped by fickle things like principal values and the like.

I wish there was a combination of ngo and corp that focussed on solving the problem with the aim to dissolve oneself when the problem is gone, instead of becoming the problem.

[dx034]

Not all public companies panic if they don't grow fast over time. But other industries are also harder to penetrate by startups. But I wouldn't blame stock markets for this obsession, especially as companies already show this pre-IPO.

[bluSCALE4]

Look at what happened to DocuSign. They provide an amazing service, great growth yet stockholders decided to completely shit on it. Then the CEO apologizes and says they missed the mark by not growing out their business the right way. IMO, they did a great job and provided a valuable service. Yet shareholder are completely forcing them to react and do things they really had no interest in pursuing.

[cheriot]

It was priced at 30x sales! Now it's back to 10x sales... which is a slightly higher multiple than before the pandemic.

For context, here's the p/s of the S&P 500 https://www.multpl.com/s-p-500-price-to-sales

DocuSign's management chose to lose money in pursuit of growth. Then the growth stopped and they were just losing money.

[usrusr]

"The tragedy of publicly traded companies" sounds like a very useful term! But I don't think that you need to look any deeper than the basic market mechanism of shareholders with realistic expectations happily selling to future shareholders with higher expectations (e.g. unrealistic expectations). If the latter exist, they will offer more than the former think the shares are worth, deal. It's a market mechanism as basic as gravity, "race to the least pessimistic".

The only thing that sometimes prevents it is when holders are emotionally attached (old family stock or brand fandom) or when holders have a strategic need to prevent certain control scenarios (often nationally flavored).

[DavidVoid]

"Growth for the sake of growth is the ideology of the cancer cell."

[HWR_14]

Facebook lost half it's value (maybe literally by now) because they stopped growing on just their flagship product (the MAU went down by a rounding error).

So why not provide a sustainable service? Because it's not valued in the market.

[dgb23]

Facebook degraded in quality and tried to squeeze everything out of their users instead of improving quality and innovation. It's short term tactics.

[lotsofpulp]

Sustainable service is valued, at the rate of inflation. If you want 20% annual returns over inflation, then you need to provide commensurate growth.

[HWR_14]

That doesn't seem to align with any economic theory or evidence I'm aware of. Care to explain your reasoning?

[WJW]

Not GP, but doesn't this just kinda follow from the definition of inflation? If you keep offering the same value but the currency it is priced in inflates by N%, you "should" be able to raise your prices by N% and not gain/lose any customers since the inflation adjusted price remains the same. This will obviously result in revenue growth of N%.

If you want revenue growth above inflation, you will need to either acquire more users, charge them more for the same product, or both. Building up the value of the product you're offering can help with both. Of course in the case of facebook these points get a bit muddled, since the users get the product for free anyway and they have such a giant customer base that finding new users is becoming an issue.

[lotsofpulp]

Why would anyone pay a premium for equity in Netflix if it is not going to provide premium returns? If I wanted average return on investment, then I would just buy a low cost index fund like VOO.

[HWR_14]

You seem to be answering a different question. I asked about you saying:

> Sustainable service is valued, at the rate of inflation.

[lotsofpulp]

Your original comment presumably talks about Facebook’s market capitalization (Facebook’s value going down), and that being a sign that the market does not “value” a sustainable service. I interpreted a sustainable service as one that does to grow by leaps and bounds and every year, and instead just chugs along offering a steady product at a steady price.

Hence my comment being that the market “values” businesses with sustainable services by offering to pay a premium for a piece of the business commensurate with the rate of inflation. Which is why Facebook’s stock price stalled, since their market cap had priced in much higher growth, and prospective buyers now do not expect that growth, and are willing to pay much less for a piece of Facebook.

[panick21_]

What are you talking about? Of course its valued, that literally why those companies have value.

But of course its valued far less then a growing company.

This seems to be fairly basic and totally logical. Stock market is forward looking. If your future it the same as present that fine but it means over time you shrink relatively and you are likely not robust against paradigm changes.

[Lio]

I've long been a paid sub-scriber to Strava. I was so happy when Mark Gainey returned to the company and returned focus to making it just a really great experience.

I think I even remember hearing him say in an interview that he would be happy to just keep the current number of subscribers and make it a more focused product.

That matters because there was a time when it seemed to be turning into just another social network. At that time the major new feature seemed to be "inspirational blog posts". That's not for me.

For about a year I cancelled my subscription but returned when the focus when back on providing useful features like route planning.

I wish that Netflix would just concentrate on providing a better experience and better content instead of degrading the existing experience even more.

[chaostheory]

This would only be possible if you don’t take investor money. Investors expect their investment to keep growing. Unfortunately, while it’s hard to build a Netflix with other people’s money, it’s near impossible to bootstrap.

The closest one was Crunchy Roll I think, and that was only possible since they were essentially pirating their content if I remember correctly. In the end, even with piracy it wasn’t sustainable until investor money came into play.

[HWR_14]

Investors expect to make money from their investment, but not necessarily that it keep growing. For instance, investors in commercial real estate expect steady income and some appreciation. They do not expect hockey stick growth. (I'm talking about those buying commercial real estate, not developers).

[chaostheory]

I strongly disagree. In general, investors would like as much growth as possible. Otherwise, they will pull their investment. As for venture capitalists, they would like hockey stick growth. They don't invest in startups that don't have that potential. Let's not confuse donations with investments.

[HWR_14]

VCs invest in high-risk, high-reward investments. Retired people want steady returns with less risk. Investment vehicles exist on a spectrum. You cannot talk about "investors" as a single class with a single preference. That's how both government bonds and VC can exist.

[chaostheory]

You’re right, but stocks aren’t bonds. There’s increased risk which implies increased gains. If “investors” wanted low gradual returns, they would buy bonds instead of stock. Investors want continuous growth every quarter, which is why Wall Street tends to focus on the short term. I’m not defending the status quo. I’m just describing reality.

[HWR_14]

> If “investors” wanted low gradual returns, they would buy bonds instead of stock.

If you buy Google, Amazon or Facebook, sure. But there are also lower-risk stocks. You can invest in P&G or J&J which are all about selling the same products again and again and again to the same customers and slowly expand by acquiring smaller companies with a similar business model.

[apexalpha]

>Why not take the revenue they have and provide a good, sustainable service for that income? Why does it always have to be growth or bust?

Shareholder Value.

[productceo]

Making companies chase growth is good for the economy.

Assume for the sake of contradiction that we the humankind decide not to incentivize companies to chase growth. This would mean the humankind is enabling a company to sustain its current position with existing assets and operations and nothing new. Since the company has no incentive to grow (introduce something new), the rational company will not create new additional value. Since the company is in a market dominant position, no new entrants will be able to create new additional value.

Curious to see if others see any ways to protect the interests of the humankind while taking away the incentives for market dominant companies to continue to make progress.

[nabla9]

Because increasing returns of scale combined with the increasing competition makes long-term profitability uncertain.

Netflix is the only big streaming service that relies on streaming as the only source of revenue. Netflix has to spend huge sums every year on new programming to keep subscribers. Disney/Hulu/ESPN/Hotstar, Amazon, Disney, Apple, Peacock, HBO Max, and YouTube plan to make deep cuts into Netflix revenue in the future.

[neximo64]

The issue is its possible, but if you dont someone else will, then will buy you and make you do the thing you were avoiding.

Relative growth is the ultimate leverage of power.

And while you think that might be some line or something it isn't. In the early 2000s banks basically did that, if you played it easy one that geared up more simply bought you up and they all went big into MBSs

[hurril]

Because then they will get overtaken. The growth slowdown will turn into a growth stop and after that they will begin to shrink.

[mrweasel]

Unless you're a shareholder, is that actually a problem?

There would be nothing wrong in Netflix say: We're no longer able to buy the shows and movies we'd like, because the studios are setting up their own streaming services. We now going to shift towards creating less content, but higher quality.

As I see it, one of Netflix major problems is the quality of content. They can't buy quality content anymore, so they're attempting to just make as much content as possible, hoping something will stick. Writing have been a major problem for Netflix for years. They're able to create an initial good season one of a show, but are never able to deliver in the following seasons.

Personally I don't see the problem in Netflix becoming a niche player with their own high quality content, that could allow them to lower prices as well. It's only a problem because their shareholders overpaid and insist that Netflix remain a major streaming platform in order to recover their investment.

[panick21_]

> Unless you're a shareholder, is that actually a problem?

You are aware that shareholders the owners of the company right?

Sure you might not care if Netflix becomes niche, but you have like 15$ a month of skin in the game. Not million or billions.

[hutzlibu]

This is the fear, but is it reality?

There are limited humans on this earth and if you consider, that you cannot reach them all and there is also competition, which realistically also takes some of the market, why not be fine with reality and a saturated market you cater for well?

[hurril]

Of course it is. Happens _all the time_ in business that the competition catches up and surpasses.

[zelphirkalt]

It could be difficult to catch up to the market leader, if the market leader simply continues to improve their core product. First they would need to catch up to the functionality and then also go all that long way of improving. Unless something else comes along replacing / disrupting movies and series or video technology, Netflix could stick to that and improve it.

That is in theory. I think most businesses lose the original vision at some point though and their products worsen, instead of improving. I would guess, that it is not in Netflix' genes to keep one core product and vision of the product.

The idea to show ads on Netflix is like the nail in the coffin. Users would jump to the first capable alternative, that does not show ads. Netflix would inflict itself a weak point, at which competitors could jump in and start eating their market share. It would be a big worsening of their product. Users might think: "I am paying for this, yet I am seeing ads?!"

[sudden_dystopia]

Because it’s a publicly traded company and investors demand growth. I really wish companies would stop listing after IPO and just stay private.

[peoplefromibiza]

> Why does it always have to be growth or bust?

because they borrowed too much money that they need to pay back.