Netflix loses subscribers and Hollywood cheers. Maybe it shouldn’t.

Hollywood spent years ignoring Netflix. Then, it spent years resenting it. And more recently, Hollywood has contorted itself trying to be Netflix. But now things are different: Hollywood is happy to tell you how badly Netflix has screwed up.

“This is all anyone wants to talk about,” says a talent rep who is happy to describe — anonymously, because like most people in town he does business with Netflix and wants to keep doing business with Netflix — all the ways Netflix has mismanaged itself.

This got much easier to do following Netflix’s shocking earnings report in April when the streaming company, which has always defined itself as a growth machine, announced it had lost subscribers for the first time in a decade.

But you don’t get to enjoy Netflix’s fall if you’re tumbling, too. Which means lots of people who make money from movies and TV shows need to convince themselves that Netflix’s ongoing problems — the company has already announced that it will lose another 2 million subscribers this spring — are Netflix’s problems. Not their problems.

That’s because the other scenario — that Hollywood and Wall Street have misjudged the consumer’s appetite for streaming video — would have enormous ripple effects. Companies that hoped to sell streaming subscriptions to hundreds of millions of people around the world would have to restructure. People who pay their rent making entertainment could see the endless faucet of production work start to sputter.

And consumers who have gotten used to an endless buffet of entertainment, often sold to them at a loss, might end up with fewer choices and higher prices. Which is what a top executive at one of Netflix’s biggest competitors tells me is going to happen — not immediately but eventually.

“From a consumer experience [perspective], things are going to get a little worse. They’ve been enjoying a subsidized and unsustainable amount of choice,” he said. “And I think there is going to be a little less choice across the ecosystem.“

There’s even a phrase, whispered quietly, for the fear that the good times, brought on by the billions Netflix and its competitors spent securing content, could be coming to a close: The Netflix Chill.

You can see the outlines of what that looks like at Netflix itself. It has already cut staff, with more layoffs reportedly on the way. It is also dumping projects it had in development: One network boss I talked to says he has started seeing a ton of pitches for stuff that used to be attached to Netflix but has now been cut loose — a group that includes a project announced with fanfare last year from former royal Meghan Markle. And, most surprisingly, Netflix is going to start selling a version of its service with ads — after spending all of its life insisting that it would never do that. (Disclosure: My employer, Vox Media, sells programming to Netflix.)

But for now, most of media is happy to argue that Netflix has belly-flopped on its own — leaving everyone else free to say I told you so, even if they were saying something else very recently.

“We know that without you, we would just be Netflix,” Fox Sports CEO Eric Shanks told advertisers at the company’s “upfront” sales event last month. It’s a joke he certainly wouldn’t have trotted out two years ago, when the first wave of the pandemic put the ad business in a tailspin at the same time Netflix was adding a record number of subscribers. Now, it’s a very safe roast.

“If you want to be one of the big boys, then act like a big boy,” says another talent rep — again, anonymously, because he’s still in the business of taking Netflix’s money.

Then he goes on to list all of the things Netflix should do to change: Market its individual movies and TV shows instead of marketing Netflix; make better movies and put some of them in theaters — and not just in a handful of places to qualify for awards but in lots of theaters where lots of people can watch them; stop releasing all of its shows at once, and spread them out weekly.

In short: Do all of the things traditional media companies did before Netflix changed the industry. A related critique is that Netflix could solve its problems if it was better. That’s what Roy Price, the first executive to run Amazon’s streaming foray, thinks. (Price was pushed out over sexual harassment allegations, which he denies.)

“I think that Netflix has a programming problem,” Price told me. “What was the last great Netflix show?”

That argument — replace the executives who picked your TV shows and movies and replace them with someone else — is the most Old Media argument there is, which doesn’t mean it’s wrong. For now, though, Netflix insists that all of its top executives — including co-CEOs Reed Hastings and Ted Sarandos, and content bosses Bela Bajaria and Scott Stuber — are doing great.

These are the critiques that are most comforting to Hollywood because they allow Hollywood to hope that things will continue as they have been. Under this theory, even if Netflix retrenches, there will still be plenty of competition among the other big players to keep everyone fully employed, and plenty of stuff for streaming customers to gorge on for years to come. And those competitors are going to include Amazon and Apple, who don’t seem to have any restraints on their spending, since Hollywood is a side business for both of them.

Also worth noting: Depending on what you do in Hollywood right now, you have your choice of projects to work on. A Los Angeles-based art director tells me he’s not remotely worried about a slowdown in the streaming boom because studios are struggling to staff the projects they’re already making. A studio executive tells me the labor shortage is even more acute outside of the US, in film hubs like London.

But as we’re seeing in the stock market right now, nothing goes up and to the right forever. So the nightmare scenario for Hollywood — or at least the unpleasant dream version — is that Netflix’s problems are everyone’s problems. And that if Netflix is already losing customers to newcomers, that means the market isn’t nearly as big as everyone has been hoping.

“You need to understand that the economics of these things only kick in at around 400 million subscribers,” a mogul told me — noting that Netflix, which still has the biggest audience in the world, is barely breaking even at 220 million subscribers. What happens if investors decide they no longer want to fund global entertainment giants if those giants aren’t going to make money?

For starters, it could cause problems for the likes of Candle Media, a holding company created by two former Disney executives and backed by private equity giant Blackstone. Since starting up last year, it has gone on a spending spree, acquiring all or parts of at least five different production companies, including Reese Witherspoon’s Hello Sunshine and Will and Jada Pinkett Smith’s Overbrook, often at eye-popping prices: The deal to acquire a portion of Witherspoon’s company, for instance, gave it a valuation of nearly $1 billion, despite the fact that it owns little intellectual property.

Candle Media’s premise — shared by other investors who have been plowing money into production companies tied to celebrities like LeBron James and Kevin Hart — is that streamers are going to be desperate for new stuff to show people, and that stocking up on people and companies who can make that stuff will be a good business. But lots of those deals were put together last fall when Netflix’s stock price was approaching $700; now Wall Street thinks the company is worth two-thirds of that.

Candle co-founder Kevin Mayer is sticking with his story. “We are still big believers in streaming overall, now and in the long run,” he told Hollywood trade Deadline last week.

And he’s right in at least one sense: Streaming isn’t going away, just like the internet didn’t disappear after the dot-com bubble burst in 2000. But the winners and losers certainly got reshuffled after the crash, which is why most of you can’t tell me what CMGI is without using Google. We won’t know the ending of this one for a long time.