Once Upon A Time At Netflix

Apple, Disney, HBO, and others are challenging the digital entertainment giant’s dominance like never before. Here’s how the company plans to fight back—and win—in the streaming wars.

- Michal Lev-Ram

On the fourth of July, Netflix released the much-hyped third season of its wildly successful series Stranger Things. Since it debuted in 2016, the show—a science fiction story set in small-town Indiana in the early 1980s, featuring a psychokinetic tween girl, top-secret government experiments, and a portal to another dimension—has become a cultural phenomenon. To promote season three, the global streaming giant partnered with everyone from Burger King (which debuted an “Upside Down” Whopper) to Coca-Cola (which gamely revived its failed ’80s New Coke for limited release) to Nike (which rolled out a retro-style “Hawkins High” line of sneakers and apparel). The stage was set for a blockbuster binge fest. And Stranger Things delivered.

Netflix couldn’t help but gloat a little. On July 8, the normally tight-lipped company announced that nearly 41 million households had streamed at least part of season three in its first four days of release, and more than 18 million had already devoured the entire season. (By way of comparison, back in April, HBO reported that 17.4 million people had watched the premiere episode of the hotly anticipated final season of Game of Thrones.)

That was the good news.

The bad news came nine days later, on July 17, when the Los Gatos, California, company announced its second-quarter earnings. Netflix revealed that it had lost subscribers in the U.S. for the first time in eight years—with some 120,000 American viewers abandoning the service. Slower-than-expected growth outside the U.S. also hurt: Overall, Netflix added 2.7 million subscribers in the quarter, but that was well below its target of 5 million. According to Netflix, a weaker content slate was partly to blame for the tepid results. Translation: Not enough Stranger Things–type successes had appeared in Netflix’s lineup in the previous three months. The stock plunged more than 10% in a single day.