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Illustration: Lazaro Gamio/Axios

Netflix's stock was down nearly 14% in after-hours trading Monday after the company missed expectations on revenue and subscriber growth. Stocks for almost every other tech company in the streaming business, like Roku, Spotify, Twitter, Facebook and Google, were also down following the news.

Why it matters: Netflix's miss is reigniting debate around whether the new tech economy, where companies are highly valued despite being barely or far from profitable, is sustainable long-term.

"The bulls expected continuing upside to their subscriber guidance ... and when those expectations were cracked, the stock cracked."
— Michael Pachter, managing director of Equity Research at Wedbush Securities to Axios

The miss wasn't entirely shocking. Most analysts agree that Netflix's momentum wasn't sustainable, especially in the U.S., where analysts say the tech giant was beginning to reach a point of saturation.

  • Jill Rosengard, EVP at broadcast research firm Frank N. Magid Associates, tells Axios their research predicted a 2% net decrease in subscribers for Netflix in the U.S. six months ago.
  • The streamer is also facing increasing competition from other subscription video on-demand companies gaining market share, like Amazon, HBO and Hulu, as well as legacy media companies looking to break into the on-demand economy, like Disney and AT&T, says eMarketer principal analyst Paul Verna.

Bullish investors argue that the company will bounce back, and that Netflix is still an attractive investment for the foreseeable future.

"As an investor, we're looking over next five-ten years and Netflix is the number one service that every single person uses in general and probably across the world in the next couple of years. We're not concerned about the business. We love the way the numbers are trending. The only issue anyone has with the stock is the valuation."
— Ross Gerber, Co-Founder, President and CEO of Gerber Kawasaki Wealth and Investment Management on CNBC

Bottom line: The corporate structure of newer tech companies, as well as the pace of tech innovation, has caused investors to reward companies that can scale and adapt to consumer trends quickly, as opposed to companies that focus on consistently delivering profit, like legacy media networks.

  • Because of this, streaming companies are able to invest billions of dollars in creating and buying content to lure viewers from traditional networks, creating a virtuous cycle of dominance.
  • Case in point: Netflix topped HBO for the first time in 17 years with the most Emmy nominations for a network this year.

What's next? None of Netflix's competitors consistently disclose subscriber numbers, but earnings over the next few weeks for AT&T (HBO's new owner), Amazon, and Hulu's owners (Disney, Comcast, Fox and Turner, now owned by AT&T) could shed light on their content strategies.

Go deeper: The rising cost of digital TV

Go deeper

Progressives pressure Schumer to end filibuster

Senate Majority Leader Chuck Schumer. Photo: Win McNamee / Getty Images

A progressive coalition is pressuring Chuck Schumer on his home turf by running a digital billboard in Times Square urging the new majority leader to end the Senate filibuster.

Why it matters: Schumer is up for re-election in 2o22 and could face a challenger, and he's also spearheading his party's broader effort to hold onto its narrow congressional majorities.

4 hours ago - Health

U.S. surpasses 25 million COVID cases

A mass COVID-19 vaccination site at Dodger Stadium on Jan. 22 in Los Angeles, California. Photo: Mario Tama/Getty Images

The U.S has confirmed more than 25 million coronavirus cases, per Johns Hopkins data updated on Sunday.

The big picture: President Biden has said he expects the country's death toll to exceed 500,000 people by next month, as the rate of deaths due to the virus continues to escalate.

GOP implosion: Trump threats, payback

Spotted last week on a work van in Evansville, Ind. Photo: Sam Owens/The Evansville Courier & Press via Reuters

The GOP is getting torn apart by a spreading revolt against party leaders for failing to stand up for former President Trump and punish his critics.

Why it matters: Republican leaders suffered a nightmarish two months in Washington. Outside the nation’s capital, it's even worse.