In two pulses, which will likely not be the last, Netflix stock value is collapsing. This is unambiguously related to a loss of subscribers. Why is that happening? Well, as I continually emphasize, nearly everything is multivariate. Partially it is because, for the market leader, the exposure to market loss is greater than the opportunity for gains in market share. Additionally, Netflix has been raising their prices and while prices are low in the content industry in an absolute sense, that doesn't mean that the industry is exempt from the elasticity function. Next, there is a likely strategic error in producing original programming. The logic has been that, while an original series requires an expenditure disproportionate to the viewership, the exclusivity will bring in new subscribers that add little or no incremental costs beyond the cost of the original programming, itself. That works until the market for streaming services approaches saturation. Then, rather than being incremental costs, new subscribers are also another service's lost subscribers and, industry wide, the switch is revenue neutral.

While all those mechanisms are contributing to the fall of Netflix, its largest strategic blunder is the selling of a minority set of values when they are the market leader. In other words, while 'woke' sells in silicon valley, it doesn't over most of the U.S. and certainly not over the world. We can look at 'Emily in Paris' which, while offending the 'woke' viewership, was wildly popular in season one. As an over-reaction Netflix decided that it needed to be more culturally sensitive in season two. The characters are charming and thus it continued to be successful. However, when that mentality permeates nearly all of Netflix's programming decisions, it spells future disaster.

Successful art assumes the value system of its audience. Some counter-cultural messaging provides an edge and for more serious content can be valuable in moderation. However, programming that preaches a value system counter to its audience will likely fail. Streaming services have an interesting dynamic in that they are all or nothing in their business model. A person may subscribe to a streaming service and simply ignore an offensive series. However, if there are too many of them, the service will lose its perceived value and by unsubscribing the customer will financially damage the shows that they do like.

As I said, successful entertainment will assume the values of its audience. It will not preach those values because the audience doesn't need to be sold. If it assumes values inconsistent with its audience, it is extremely difficult to not come off as preachy. That is not entertainment; it is cultural propaganda. Netflix is preaching 'woke' when 'woke' is not consistent with the values of most of its audience. However, this is not the only problem Netflix has.

In video content, there is a style that I simply call enervated. There are many aspects to it. While some content, mostly targeted to children, is color saturated to an extreme, the enervated style is under-saturated and often fed through a blue filter. This is often combined with stark scenes, minimalist background music and scenes bereft of action. Such cinematic techniques are not without their uses. I saw a post-apocalyptic time travel story where scenes from the future used this enervated style while scenes from the present did not. It added to the contrast and could be considered a proper use.

However, before unsubscribing from Netflix, I noticed an unmistakable uptick in content that was dominated by the enervated style. In aggregate, it conveys a pessimistic world view and while this is consonant with the world view of some of Netflix's audience, for the most part these offerings are simply too stark to appeal to most viewers. There is undoubtedly a place for a streaming service that traffics in enervated content. It is certainly more popular in the 'art film' genre. However, it is folly for any service that is or wishes to be the market leader to allow it to dominate.

I am more impressed with Amazon Prime Video offerings. They present a robust and more dynamic offering of historical content and limits its use of exclusive content. Rather it places the content of more specialized streaming services and content available only through additional subscription, purchase or rental on its site. Each offering has prominently displayed 'prime', 'ads' and '$' icons that signal which denotes whether they are free, contain ads (mostly from the IMDb partner) or available only with additional fees. There is not a predominance of enervated content, but it generally offers more mainstream content. It does offer additional enervated content through some of its partners.

Lastly, there is the matter of turnover rate. In other words, when a subscriber first joins a streaming service, they will typically be confronted with a superfluity of options. However, if the service does not turnover its content rapidly enough, eventually, the selection will devolve into 'already watched' and 'not interested'. This creates a situation where the subscriber is likely to move on to a new streaming service with new content. Because Netflix has put so much of its budget into original programming, its inventory is smaller and has a slower turnover than Amazon Prime Video.

The above considerations suggest that Amazon Prime Video may overtake Netflix as the market leader with Netflix subsiding to a more specialized streaming service that, while successful in some communities, will generally fade into relative obscurity. This is not inevitable. However, it will require a severe modification of its business model. It needs to return to an offering that appeals to the population as a whole, not just its 'woke' subscribers, reduce its reliance on original programming or at least offer it as a fee based add-on, and up its content turnover rate. Making these decisions, as Elon Musk is telegraphing about Twitter, will probably require wholesale turnover of the management ranks.

A very important factor is to recognize that the industry has not reached maturity. In other words, the typical business model of today will not be the typical business model in ten years. The implosion of Netflix will hardly be the last disruption the industry will experience.