- There's a good chance that one

of your favorite shows on Netflix is already canceled.

Netflix is facing a series

of issues that they didn't face even five years ago.

They've got looming competition

from some of the biggest players in entertainment today.

They also just announced that they lost

subscribers in the United States

for the first time in nearly a decade.

And because of all this Netflix

has to do something that it really didn't have to

up until now, start acting like a cable network

and cancel shows.

Remember when Netflix was like super exciting?

Every show that came out felt like a blockbuster release

because everything about it felt really cool and unique.

Netflix came in

and essentially Beyonced the heck,

can I say hell?

Beyonced the hell out of TV

by dropping entire seasons at once.

This is something that only

a network on the internet could do, no one else could.

By 2015, Netflix was like this hotbed for creators.

Everyone wanted to work with them

'cause Netflix was doing some cool things.

- Orange is the New Black.

- Orange is the New Black, House of Cards,

and even Unbreakable Kimmy Schmidt

were being nominated for

and winning Emmy's.

The company's content budget grew every single year,

which let them take chances

on weirder projects.

The Wachowski sisters, best known for The Matrix,

had a Sci-Fi series,

which reportedly cost Netflix nearly nine million dollars

an episode.

That's on par with some of Game of Thrones episodes.

Netflix had one major advantage,

it was the only player in the game.

Most importantly, if Netflix was winning Emmy's,

it proved to everyone,

including major networks with ABC and CBS,

and also prestige networks like HBO,

that internet TV was actually a thing

people should pay attention to.

But that's simply not good enough anymore.

By 2020, Netflix is gonna have major competition

from some of the biggest companies in the world.

Apple, Disney, Comcast, NBC Universal,

and AT&T's Warner Media are all

launching streaming services.

And in order for them to compete with Netflix,

they're removing their own content from Netflix,

meaning if you wanna watch Friends,

you have to go to HBO Max,

Warner Media's streaming service,

in order to do it.

- I can't even begin to explain to you

how much I am gonna miss you.

- With less licensed shows,

Netflix has to invest in more original content

in order to keep subscribers.

Netflix relies on something called the efficiency metric.

Basically, Netflix puts more

of an emphasis on shows

that can bring in new subscribers

or keep those who are at risk of canceling.

That makes it harder to justify renewing a series.

How many people are gonna subscribe to Netflix

for a third season of the OA

if not many people watched the first two seasons?

The way executives see it

that money would probably be better spent on a new series,

particularly in an emerging market

that's not the United States.

Basically, the United States is over saturated.

Everyone in the U.S. who's going to have Netflix

probably already does.

But there are huge markets in East Asia

or South America that are clamoring

to sign up for the service.

That might explain why you're also

seeing more Bollywood films

or South American soap operas on your service.

But Netflix's investment in other series

doesn't stop fans from hurting

when their favorite show gets canceled.

Take Tuca & Bertie.

That show is critically adored

and had a dedicated fan base,

but unfortunately it just wasn't big enough.

Creator Lisa Hanawalt even tweeted

that it just didn't have the sizeable

viewership it needed for Netflix to renew it.

What's interesting and unique to Netflix

is that Hanawalt blamed the algorhithim.

It's unclear just how many people

were actually served the show on their homepage.

Unlike traditional cable,

which slots shows into one specific spot every week,

Netflix is more like YouTube.

There are so many shows, movies

and specials that Netflix relies

on a recommendation algorhithim

to try and pair viewers with things they'd be interest in.

It doesn't always work.

It's not like Netflix isn't interested

in investing in creators or original shows,

it's just about to get much more focused.

The company's investing hundreds

of millions of dollars into specific creators

that they think can deliver guaranteed hits.

You've got David Benioff

and D. B. Weiss,

who created Game of Thrones,

coming to Netflix for $250 million.

Ryan Murphy, the creator

of American Horror Story,

he's coming over for $300 million.

And Shonda Rimes,

the creator of Grey's Anatomy,

one of my favorite shows,

is coming over for $150 million.

So it's not all bad news.

Netflix still needs new shows

and is clearly still willing to pay for them.

There's a good chance that weird niche TV

is still going to wind up on Netflix,

it's just that based on everything

we're reading and seeing,

it's likely that it's gonna come

from someone like J.J. Abrams.

There are still shows that can make the case for renewal

past the third season,

but those are increasingly becoming

the exception to the rule.

One of those shows is Stranger Things,

which third season saw more than 40 million

people watch it in just four days.