[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.

[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.

[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.

[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.

[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.

[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.

[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.

[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).

[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.

[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?

[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.