One may say that Netflix (NASDAQ:NFLX) has seen better times. Due to a gloomy market and a decline in subscribers, the vast media company saw its stock drop by 59% in 2022. Netflix (NASDAQ:NFLX) is experiencing growth issues it is not accustomed to due to a post-pandemic slowdown and a very competitive streaming landscape.
Due to the downturn, the company is cutting expenditures, particularly in a crucial area for its future growth. And that’s why we are not looking to invest in Netflix stock right now.
Reducing the company’s most vital advantage
One of Netflix’s (NASDAQ:NFLX) earliest original series was 2013’s House of Cards. Before its introduction, the streaming leader licenced content from other firms. However, as the importance of streaming grew, those other companies began launching their own direct-to-consumer offers, causing the streaming leader to lose access to that content. Netflix (NASDAQ:NFLX) has invested around $80 billion in content creation between 2014 and 2021, a sum that has undoubtedly contributed to the company’s supremacy in the business.
Netflix (NASDAQ:NFLX) still intends to invest less in original programming because its revenue growth has slowed to 9.2% in the first half of 2022 from double-digit gains in the past. Management predicts yearly content spending of $17 billion to $18 billion through 202121, consistent with the previous year’s projections.
On the second quarter results call, CFO Spence Neumann noted, “Our content expense will continue to grow, but it is more tempered as we compensated for the growth in our revenue.” Management wants to get back on track with subscriber growth after reporting two consecutive quarters of net subscriber losses in the first half of this year. Advertisement-supported subscriptions are a key component of this initiative.
As a means of acquiring franchises
Billions of hours have been watched since the premiere of critically acclaimed shows, including “Squid Game,” “Money Heist,” and “Stranger Things.” Moreover, the company’s most successful films include the star-studded efforts of Red Notice and The Gray Man.
Taking a page out of Walt Disney’s playbook, Netflix (NASDAQ:NFLX) executives are hoping to establish film franchises out of these films to establish cinematic universes with dedicated followings. But this will be difficult for the firm to accomplish, as the characters and storylines lack the depth and continuity of the Marvel film franchise.
By limiting how much it may spend on original programming, Netflix (NASDAQ:NFLX) is stifling its ability to make the subsequent smash success with audiences. Using a basketball metaphor, it’s like playing a game where you have a limited number of shots every half, and you’re trying to get as many points as possible. The corporation has improved significantly over the past decade at making engaging material, but it still needs to perfect its abilities in this area because not everything can be approved.
Now more than ever, there is a lot of competition in the streaming media market. Netflix (NASDAQ:NFLX) has significantly benefited from the advantages it has enjoyed as a pioneer in the streaming video industry and its ability to obtain inexpensive debt during the past few years. Even as competition in the streaming media market is heating up, Netflix keeps its most distinctive feature, its updated library of original programming, under wraps.
As this action increases Netflix’s (NASDAQ:NFLX) potential to produce positive free cash flow in the years to come, it may prove financially fruitful. And I think a lot of investors would be happy with that prospect. Nevertheless, the following decade will be much more difficult for the streaming powerhouse. Due to these concerns, We have decided against becoming a shareholder.
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Author Shariq Khan 
