The days when Netflix was considered one of the five best-performing US tech companies are long gone. The streaming service’s share price is down 71 per cent from its high point last year. That eclipses the sell-off at Apple, Alphabet, Facebook/Meta and Amazon — aka the other Faang stocks.

Netflix has announced job cuts and suggested ways to raise revenue by introducing advertising and charging for shared passwords. But reducing spending on content is a trickier problem. Total content obligations are now over $22bn, up from just over $19bn in the same period two years ago.

Content is the lifeblood of a streaming service. Lockdowns encouraged more users to sign up to entertainment subscriptions but that meant Netflix compressed years of expected growth into the space of a few months. Now numbers are falling. This year it reported its first subscriber loss in over a decade. In spite of the recent return of hit show Stranger Things, it expects further declines. Revenue growth is slowing.

Netflix remains the largest streaming service with close to 222mn members. But competitors with deep pockets are adding more users and expanding their offers. Amazon and Apple are moving into live sports while rivals like Disney use existing intellectual property to create new shows. To keep up, Netflix must continue to create its own IP.

On the plus side, Netflix has been expanding its content library for years. It did this by taking on debt. Long-term debt stood at $14.5bn in the last quarter. Low interest rates kept those costs down. Rising rates will make debt-driven content more expensive.

Netflix has cut back a little. In the first quarter, content liabilities dipped to $4.1bn from $4.3bn in the previous quarter. But total contingent liabilities, which do not appear on the balance sheet, remain high. As of March 31, Netflix had over $15bn. These reflect costs that cannot be quantified yet — future episodes of a popular show, for example. Netflix cannot change its spending on content without risking an even heavier loss of subscribers.