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Tired of catching up with a Silicon Valley spy, many entertainment executives have been waiting for Netflix to arrive. But it might not be the way they hoped it would be.

Netflix said this week lost more subscribers than you signed up for in the first three months of the year, reversing a decade of steady growth. Shares of the company tumbled 35 percent Wednesday, losing nearly $50 billion in market capitalization. Disney, Warner Bros. The pain was shared across the industry as shares of companies like Discovery and Paramount also fell.

Netflix blamed a number of problems, from increased competition to its decision to drop all its subscribers in Russia due to the war in Ukraine. For entertainment executives and analysts, the moment was decisive in the so-called streaming wars. After years of struggling, they may see a chance to gain ground over their giant rivals.

But Netflix’s stunning comeback also raises a number of questions that need to be answered in the coming months, as more traditional media companies race towards subscription businesses largely modeled after Netflix’s creations. Is there such a thing as too many streaming options? How many people are really willing to pay for them? And could that business be less profitable and far less reliable than the industry has done for years?

“They’ve gone from a solid business model to an unsound one,” veteran entertainment executive Barry Diller said in an interview Wednesday, referring to several legacy companies that have recently rolled out streaming options. “I think they’re saying today, ‘Maybe the trees won’t grow all the way to the sky’.”

Worried about declining movie theater ticket sales and television broadcast ratings, the media industry is instantly reshaping itself to go all-out and compete with Netflix. Disney has invested billions. Discovery Inc. and WarnerMedia completed a merger this month to better compete with the streaming giants. CNN even introduced its own streaming version, which has so far attracted overwhelming subscriber attention.

But Netflix’s sudden problems mean that these investments carry too much risk. The broadcast market may still be a huge one in the long run, but the next few years may prove difficult, said Rich Greenfield, LightShed Partners analyst and long-time broadcast supporter.

“It seems much less profitable regardless, and that’s a problem for everyone,” he said. Fewer subscribers means less profit for everyone, with increased costs due to fiercer competition to create original content.

Another concern, some analysts say, is the so-called loss rate. Kevin Westcott, vice president of consulting firm Deloitte, said consumers are more concerned about rising prices for streaming services and the more likely they are to cancel a service when a favorite show ends. According to Deloitte, 25 percent of US customers cancel a streaming service only to resubscribe within a year.

“They were frustrated that they had to have so many subscriptions to have all the content they wanted,” said Mr. Westcott.

Netflix’s problems are putting pressure on Disney, which will report its subscriber numbers on May 11. If Disney’s numbers fail to live up to expectations, the distress signals surrounding the broadcast business will grow louder.

There was fear among Hollywood talent agents on Wednesday that the Netflix gravy train could slow down and the company’s willingness to pay whatever it takes for scripts and talent deals may fade. The same was true for the producers. Netflix has spent hundreds of millions of dollars on the Academy Awards over the past five years. It has yet to win the Best Picture Oscar, but its dedication to prestigious filmmaking has been praised.

Michael Shamberg, whose four-part documentary on the Three Mile Island nuclear power plant crisis will soon air on Netflix, said: “It’s going to have an impact on us as the new reality forces them to cut their $17 billion annual programming budget.” moon. “As a producer, I always think of them as the first stop to come up with original ideas. If subscriber growth declines and that forces them to cut back on programming, will they stop taking risks on innovative TV shows and Oscar movies?”

Netflix admitted that the growth stagnation was partly due to wild competition. The company would say that its primary competition is not with other streaming services, but with diversions like sleep and reading.

Now there’s a question as to whether Netflix’s original content is strong enough to set it apart, as companies with deeper pockets like Apple and Amazon continue to increase their spending on critically acclaimed shows like “Severance” on Apple TV+ and Amazon’s The upcoming first season of the Lord of the Rings prequel, which is said to have spent more than $450 million.

“The truth is there’s so much alternative content, where is the new stuff that’s crushing it? Where are the new franchises?” asked the analyst, Mr. Greenfield. He noted that popular shows like “Ozark”, “Stranger Things” and “The Crown” will end their broadcasts soon.

Indeed, interest in Netflix’s vast library is showing signs of stagnation.

“Demand for each title in the Netflix catalog is pretty flat,” said Alejandro Rojas, vice president of applied analytics at Parrot Analytics, a research firm. “The HBO Max and Disney+ catalog is growing in double digits. That’s a big difference.”

Netflix’s performance may cause competitors to reconsider their own international expansion plans, potentially making more targeted efforts overseas. Netflix’s subscriptions dwindled not only in the United States and Canada, but also in Europe and Latin America.

“Netflix threw the kitchen sink on this one,” said industry analyst Michael Nathanson. “They’ve taken the first action, spent a lot of money on content, and are producing more localized content. They did the right things, but they still hit a wall.”

Normally confident Netflix executives looked particularly ambivalent on Tuesday, when first-quarter results were announced. CEO Reed Hastings, who once swore that there would never be ads on Netflix, said the company would consider running a lower-priced ad. ad-supported layer within the next year or two. Netflix also said it will end password sharing, an app it has said it has had no issues with in the past.

“We’ve been thinking about this for a few years, but working on it as it’s growing fast wasn’t a high priority,” said Mr Hastings. “And now, we’re working very hard on it.”

Disney, Warner Bros. Netflix has no ad sales experience, while competitors like Discovery and Paramount have a large advertising infrastructure. And the password crackdown has some analysts wondering if Netflix has reached market saturation in the United States.

Mr. Hastings has tried to reassure everyone that Netflix has had a hard time before and will fix the problems. He said the company is now “super focused” on “grabbing the favor of our investors”.

brooks barnes contributing reporting.