First mover advantage. The problem Netflix solves for consumers is entertainment. Netflix solves this problem for a large base - 200m+. While competing services will come up, customer acquisition will be challenging. Young folks who have had Netflix and Amazon Prime Video for years will not want to pay for another third service. They might subscribe to HBO Max to watch one show/movie like Dune and cancel after watching. Unless these new services pump out content at the rate of Netflix, they will not get traction.

Global. Netflix is a global player. The future of media is global, as evidenced by hits like Squid Game, Money Heist, etc. Given the enormous costs of running an international operation, it is likely like with other industries that this will consolidate to 3 players. Netflix has the best chance at being the leading player (along with Prime Video and Disney).

Long growth path ahead. Netflix penetration is correlated to broadband penetration and smart TV penetration. Every smart TV has Netflix as the first option on the screen, and most have it as a button on their remote. Many countries are still early in their journey to migrate over to fiber/cable from DSL. As global broadband + smart TV penetration increases, the market for Netflix will expand.

Ad-supported Tier. Netflix has long been a subscription-only service. In India, a TV cable bundle costs $3 per month, and most of the revenue comes from ads. Netflix will finally release an ad-supported version that should enable growth in India and other emerging markets.

Cracking down on password sharing. Eventually, when Netflix figures out how to crack down on password sharing, they will unlock significant revenue.

Death of the cable bundle. In the US, the cable subscriber count peaked in 2012 and has been trending downward with accelerating losses. The cable bundle costs $100 per month. For folks used to cable + ads, Netflix is a breath of fresh air with no ads and control over when and what you watch. With the inflation budget pinching, 2022 will likely have the highest yearly losses for cable subscribers.

The cable bundle has been the cash cow for the traditional media companies: Viacom, Disney, NBC, and Warner Brothers Discovery. Cable subscriber losses and possibly falling ad rates will reduce cash flows. These media companies will be forced to reconsider investing aggressively in a streaming operation, thereby preventing them from achieving scale.

Netflix Price to Sales today at 2.6 is a significant discount from its long-term average of 8. The loss of subscribers is due to COVID dynamics. It is a bump in the road; Netflix remains a long-term compounder and should be able to capture market share and grow free cash flow.