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April 20, 2022

Happy 4/20 to all who celebrate.

Today's newsletter is 1,196 words, a 5-minute read.

1 big thing: Netflix slowdown leaves streaming biz reeling

Data: Netflix earnings reports; Chart: Erin Davis/Axios

Netflix's quarterly subscriber loss — its first in a decade — has sent shockwaves through the entire streaming industry, Axios' Sara Fischer reports.

Why it matters: For years Wall Street rewarded Netflix with an outsized market value for its ability to keep expanding its user base. Now, reality is setting in.

Details: Netflix's stock sank more than 20% Tuesday after the streaming giant said it lost 200,000 subscribers in 2022's first quarter and missed revenue targets.

  • Because Netflix reports earnings ahead of most competitors, the news sent shares tumbling across the entertainment sector.
  • Netflix's stock was already down more than 40% year-to-date, thanks to increased competition and weak growth forecasts.
  • Things will get worse before they get better. The streaming giant forecasts losing 2 million more subscribers in the second quarter.

Context: Netflix's decline "calls into question the end-state economics of these businesses," wrote media analyst Michael Nathanson in a note to clients earlier this year, when Netflix first began to show signs of a slowdown.

Be smart: After downplaying competition as a serious threat to their business for years, Netflix executives are finally beginning to admit that the growth of competitive services is taking a toll.

  • For years, Netflix was the only major streaming player investing heavily in licensing and producing original content on a large scale.
  • But over the past few months, Disney+ and HBO Max have begun major international expansions. Disney has said it plans to spend $33 billion on content this year, compared to the $14 billion Netflix spent last year.

Netflix chair Reed Hastings also attributed the subscriber slowdown to password sharing, which the company has begun to crack down on.

The big picture: Netflix's massive slowdown is a wake-up call for Wall Street, which for years has bet on subscription streaming services as the future of television.

  • The problem: While supply has continued to grow, the amount consumers are willing to spend on subscription services has remained relatively consistent over the past few years, according to data from media research firm Magid.
  • Most consumers are willing to pay for roughly four services at a time at about $10 monthly each. Macroeconomic factors, like inflation, and price hikes earlier this year may be making customers less willing to spend.

What's next: Netflix told investors it's weighing offering a cheaper, ad-supported subscription plan over "the next year or two" in an effort to expand its subscriber base.

  • As the streaming subscription market becomes more saturated, analysts have argued that an ad-supported tier is Netflix's best option for growth.
  • Most of the major general entertainment services, including Disney+, Hulu, Discovery+, HBO Max, Paramount+ and Peacock, offer ad-supported tiers.

Go deeper: For streaming, the future is free

2. "988" unknown to most Americans

An illustration of a cell phone with the "988" suicide hotline displayed
Illustration: Eniola Odetunde/Axios

With just three months until "988" is launched as a shortcut to the national suicide prevention hotline, advocates are concerned that relatively few people know about it, Axios' Margaret Harding McGill reports.

Why it matters: The overall suicide rate in the U.S. increased 30% from 2000-2020, with LGBTQ youth more than four times as likely to attempt suicide as their peers.

Catch up quick: Phone service providers are required to route calls or text messages sent to 988 to the National Suicide Prevention Lifeline (1-800-273-8255) by July 16.

Driving the news: A new poll commissioned by the Trevor Project and shared exclusively with Axios found that 69% of respondents had not seen, read or heard much about calling 988 to reach the Lifeline.

  • While nearly a third of the people polled had seen something about it, Preston Mitchum, director of advocacy and government affairs for the Trevor Project, told Axios that is not enough.
  • "Since something is going live that is actually a watershed moment for LGBTQ people, everyone should know about it," Mitchum said. "Frankly, I'm disappointed that the number's just not 100%."

The big picture: More marketing ahead of July will help raise awareness of 988, but there are concerns that the expected increase in outreach will strain crisis center capacity.

What's next: The Department of Health and Human Services on Tuesday announced $105 million in grants to states to help prepare for the transition to 988.

If you or someone you know may be considering suicide, contact the National Suicide Prevention Lifeline at 1-800-273-8255 (En Español: 1-888-628-9454; Deaf and Hard of Hearing: dial 711 then 1-800-273-8255) or the Crisis Text Line by texting HOME to 741741.

3. Exclusive: Chamber seeks FTC commissioner delay

An illustration of a hammer chiseling away at a suitcase
Illustration: Aïda Amer/Axios

The U.S. Chamber of Commerce wants to delay confirmation of Federal Trade Commission nominee Alvaro Bedoya, per a letter to Senate leadership shared exclusively with Axios' Ashley Gold.

Driving the news: Chamber executive vice president Neil Bradley wrote to Senate Majority Leader Chuck Schumer (D-N.Y.) and Minority Leader Mitch McConnell (R-Ky.) Wednesday, asking that legislators press Bedoya on a number of questions before a full Senate vote on his nomination, which could happen as soon as next week.

Why it matters: Bedoya's confirmation would give chair Lina Khan a majority at the FTC, allowing her to push forward more aspects of her pro-competition, anti-big business policy agenda that the Chamber has sharply criticized.

  • Bedoya, a lawyer and Georgetown professor, was nominated by President Biden in 2021 and has yet to be confirmed to the FTC.

Flashback: The Chamber and the FTC have been at war since Khan become chair, with the Chamber arguing the FTC has not been transparent with the business community and has disrupted regular protocol.

  • The Chamber has also argued proposed antitrust legislation that would impact companies like Google, Apple, Meta and Amazon would harm U.S. competitiveness and national security.

4. Nintendo hit with labor complaint

An unnamed worker has filed a complaint against Nintendo and a firm it uses for hiring contractors, alleging the companies violated the legally protected right to unionize, Axios' Stephen Totilo reports.

Why it matters: The National Labor Relations Board complaint, filed on Friday, brings one of gaming's most successful companies into the increasingly active conversation about workers’ rights in the sector.

The details: The allegations state that Nintendo of America and global hiring firm Aston Carter engaged in "concerted activities" and made "coercive actions" against a worker, interfering with their legally protected right to organize.

  • The exact claims of what happened are unclear, because the publicly posted docket for the complaint lists broad charges but doesn’t describe what is said to have occurred.

Between the lines: Unionization efforts in gaming have increased over the last year, due to both simmering worker discontent in an intense field and in reaction to high-profile scandals at big game companies.

5. Take note

On Tap

Trading Places

  • Xbox research and design chief Chris Novak is leaving the company after 20 years.
  • Colin Decker is stepping down as CEO of Sony-0wned anime site Crunchyroll, with COO and former Funimation executive Rahul Purini taking his place.

ICYMI

6. After you Login

Here's one more thing tech workers need to watch for as they begin to come back to the office: the return of office pranks.