Netflix (NFLX) investors are still reeling after the tech-heavy Nasdaq Composite Index (^IXIC) posted its worst month since 2008. The stock – once a big winner from the pandemic – is down about 75% from its November peak, the market capitalization of $300 billion now sits south of $80 billion.

The streaming giant’s drop in subscribers in April has spurred speculation on Wall Street about its next big move, which could involve a lower-cost ad-supported option or even a crackdown on password sharing. In the meantime, it’s worth revisiting the history of the company that arguably bankrupted an entire movie rental industry.

Step back to 1997 when Reed Hastings and Marc Randolph founded Netflix. According to Britannica, Hastings came up with the idea for Netflix after racking up a hefty charge for a videotape he returned late. Unfortunately, streaming was not yet an option since internet users still faced painfully slow dial-up internet connections. The founders opted for a new Japanese technology that would soon supplant bulky VHS tapes: the digital video disc.

From DVD to online streaming

The same size as its compact disc cousin, the DVD drastically improved video quality and proved robust enough to survive the post office. It was the emailability of DVDs that made Hastings think Netflix would work in the first place, according to Britannica. The two were no strangers to Silicon Valley and, with seed capital in hand, they created the company that would change the media landscape in less than a decade.

Netflix quickly made inroads into the video rental space, capitalizing on the pain points of the video rental giants at the time. You didn’t have to “be nice and rewind,” and Netflix got rid of the other big problem with rental age: inflated due dates and late fees.

The video rental model as a service was born. For $15.95 a month, you could fire Blockbuster (BB), though the video store around the corner would still be around for years to come.

The Blockbuster movie rental store is opened in the Denver suburb of Broomfield, Colorado April 6, 2011. REUTERS/Rick Wilking (UNITED STATES – Tags: BUSINESS)

By the time the tech bubble imploded in 1999, the still-private company already had 239,000 subscribers with a library of 3,100 titles. Netflix hit one million subscribers in 2001 and went public the following year at $15 a share.

As dial-up internet gave way to broadband, the streaming model eventually became feasible. In 2007, Netflix launched its online streaming service, and five years later Hastings & Co. entered the content business with the political thriller “House of Cards” and “Lilyhammer,” the story of a New York mobster hiding in rural Norway.

A “Clear as Mud” Future Prospect

Netflix now spends $17 billion a year on content and expects a loss of 2 million subscribers in the current quarter. It’s back to the drawing board for shell-shocked Netflix investors who are also grappling with tech stocks that collectively lost $1.8 trillion in April. Not only is Netflix falling victim to the latest tech crash, but it’s also facing more competition than ever in its 23-year history. The streaming competition now includes Hulu, YouTube, Disney+, Apple TV, HBO Max, Peacock and Paramount, to name a few.

Meanwhile, networks like NBC and CBS have pulled their own content to grab attention on their streaming platforms. Shows like “The Office” and “Friends” left Netflix to return to NBC’s Peacock. Meanwhile, Marvel’s parent company Disney has picked up popular Marvel Netflix Originals like “Daredevil” and “Jessica Jones.”

Amid such headwinds, Piper Sandler downgraded Netflix to “neutral” last month and lowered its price target to $293 from $562, saying the company is unlikely to return to its earlier growth of subscribers. Weighing in on Netflix’s options, Piper Sandler analysts noted, “Password sharing and ad-supported levels look promising, but implementation is over two years away.”

Wells Fargo also finds no clarity in the results. “Negative [subscription] growth and investments to re-accelerate revenue are the nail in the NFLX narrative coffin,” the company wrote. Bank analysts added that Netflix’s outlook is now “clear as mud”.

The stock was trading at $173.10 as of Monday’s market close, down from a high of $700 per share in November 2021.

Jared Blikre is a markets reporter on Yahoo Finance Live. follow him @SPYJared. Devan Burris is a producer at Yahoo Finance Live.

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