And here it is! Welcome to the Ankler’s year-end, company-by-company, streaming titan by streaming titan report card on how our giants fared in 2019. For the next couple of weeks, we’ll be going through them all; gossip, scuttlebutt, searing analysis and cheap shots aplenty.

But today with start off the festivities with the perennial hot-button topic, the streaming App that started it all. Take it away…The year in Netflix!

A year ago, they were riding higher than the wind. Cash flowed. Misfires? Shrugged off. The media bought the viewership tidbits whole. Projections? Routinely smashed. There was talk of a billion-person audience People opined that Netflix had so much of a head start that Disney were fools even to get in the ring. It should just give up and become suppliers for the 1000-Year App.

And now, it’s not that the mindless, untrammeled boosterism has evaporated—there is still plenty to be gained around here from mindless hypestering—but this year, for every announcement from the Netflix HQ, reality has pulled up a chair and cleared its throat.

Why don’t we start at the end here with the events of this week, which we might just think of as the first week of the rest of Netflix’s life; what may prove to be either the apex or the beginning of the end of the storied, historic, Drunken Sailor Era (DSE) which has turned entertainment inside out..

The two sides of the coin this week:

• The Maginot Line resisting The App’s push into awards season finally crumbled, as they have become the undeniable dominant force (win or lose) in the awards race.

• A mere two years ago, the notion that Michael Bay would be making TV movies (on a Michael Bay scale) would have seemed madness. And yet, here we are.

Now both of these items are major breakthroughs and very different kinds of breakthroughs, but at what price were they achieved? More to the point: Were these milestones another break in the dam toward the App’s conquest of entertainment? Or will this be seen as the high tide mark, the place where Netflix’s (and its tech brethren’s) world-devouring ambitions crashed against the door of reality?

How big a change is that all? Let’s start with the Globes—and beyond that the awards race. Two years ago, the idea that this streaming TV service was going to crash its way into the Oscar race would’ve been beyond belief. If it meant anything, all it stood for was yet another in a long line of Hollywood arrivistes with dreams of Oscar glory joining that very long queue.

For starters, Netflix not only didn’t release films, but was brazenly contemptuous of those who did. Beyond that, its “film” division seemed a ramshackle joke, putting out a string of ludicrous misfires while preening that they had landed Will Smith. Their first year of business was a weekly train wreck of proportions Hollywood had never seen.

Well, somehow or other, either Netflix learned from its mistakes or the data kicked in. Financially, the Netflix film project may yet prove to be the most insane folly since WeWork, but no one can say the films are an embarrassment anymore.

But more to the point, you can define a studio by its priorities, because in the real-life business of entertainment, you can’t do everything. Traditionally, you can’t even do a lot, you can maybe do 16 or 20 things. So a studio has to make some hard choices on what it’s going to bet on every year.

Until Netflix came along and said: No, you don’t. You can put your chips on all the squares. You can bet on black, red and zero, and double zero! And you’ll be the winner on every spin of the wheel!

There were a few on the sidelines who sputtered, “but…but…math!” Those voices were drowned out by those people at the table thrilled at the incredible streak: Look how Netflix kept winning week after week: crime documentaries, teenage rom-coms, 80’s throwback genre adventures, stand-up specials. Entertainment truly had never had such a buzz-generating machine.

Netflix roared into show biz with the tech world’s hyper-focus, determination, “we’re not here to sit around at the Palm all day” attitude, and more important, an unlimited bankroll before which earthbound economics seemed effectively repealed. It would do it all. Reed Hastings once said something about Netflix would be the home of every person’s favorite show. That was every person on Earth, in every demographic on Earth. Presumably, since they weren’t sticklers on quality control, to get every demo’s favorite show, they’d also have produced their second favorite show too. And their fifth and tenth favorites.

Reed has been talking a great deal lately about how there will room for many services in a household’s subscription budget. Assuredly there will be. The talk that one service would win was always stupid (although stupid things happen sometimes). But it was, in fact, the business proposition of Netflix. You don’t try to own every genre and demo and country on Earth just so you can be one of a bunch of services, fighting with them over pricing and in a bidding war for every script that comes on the market.

But this has been the strategy in every sector that the tech world has entered in the past couple decades: flood the zone and undercut the competition until everyone else is gone and then, in theory, you can control the price. Because tech investors apparently think nothing of massive deficits in pursuit of the final monopoly, they were willing to bankroll this strategy and continue to do so as of this writing.

We shouldn’t underrate what Netflix has achieved. Besides building a massive company, it shook loose the definition of what people would pay to watch, get excited to watch, in 1,000 ways. Underneath the cold-algorithm-fueled heart, it was showmanship in the classic sense; that is, constantly looking for ways to amaze and delight audiences with novelty and audacity.

The App managed to give the people what they want in every end of the spectrum: a Between Two Ferns movie, a Full House reunion, Choose Your Own Adventure, unlimited Black Mirrors, Hannah Gadsby, Bojack Horseman, foreign-language Oscar nominees, Christmas movies, teen romantic comedies, and every other genre left to by a Hollywood in thrall of Big IP.

If it wasn’t everyone on Earth’s favorite show, it certainly had everyone on Earth buzzing.

The problems were:

1. Buzz is not a self-sustaining machine. Live by the buzz, die by the buzz. When buzz is the goal, it’s hard to build anything durable in your brand. In contrast to Disney: a hundred years of dedication to a particular swath of entertainment at a very high level of quality. Or HBO: a meticulous development process producing stellar results for its niche. Or even Universal, which might not have much meaning as a brand but has a tradition of competence that continues to serve it well.

2. That knockout punch never came. This is where the tech strategy is possibly catastrophically mismatched for Hollywood: There are and can be no permanent monopolies in entertainment. Whatever you do today will seem very dull in ten minutes or less. It’s not that hard (relatively) to make a show, and anyone who can make one can potentially make a great one. For instance: Disney, which stepped into the Great Entertainment Semi-Finals with the buzziest new show in months.

In fact, if you want to go down that road, it’s been a bit now since The App had one of its breakthrough shows. The two right now that seem to have people meme-ing the most—Mandolorian and Watchmen—are on its competitors.

So where does that put Netflix? Running deficits in the eleven-figure range, with sudden competition for viewers and buzz. It's got all these brand-name showrunners locked up. But if the public shrug over the debut of The Politician didn’t give the App's command a lurch in their stomach to see how these deals might play themselves out, it should have. (These paydays might not be quite so ruinously unfavorable as they seem at first glance. Much of the big money, I’m told, comes down the line when a show gets to its fourth and fifth season. That is, if any get to a fourth or fifth season, which remains at the discretion of Netflix. Which brings up another problem: If The App starts pulling the plug on Ryan and Shonda’s shows after a season or two, denying them that big payday, what does that do to its ability to stock their pond with more mega-creators churning out shows for them?

Which brings us to Netflix’s two big pieces of news this week: the Globes noms and the Michael Bay debut.

The app’s awards sector success is the perfect marriage of tech world ruthlessness and determination meeting the confusion, laziness, and corruption of a field ripe for, not just disruption but plunder. In the Globes, for instance, Netflix found a world that the machine could spit the answer to just how much pressure where would it take for this wall to crumble. (Answer: 2,000 trips to Ted’s house + gift bags, back rubs, late-night phone calls, special screenings, etc, etc, etc) Yesterday’s Washington Post story about the Netflix express flying critics to party trains around the country, had some good detail about just how for sale this whole world is. And Netflix has the money to buy.

How much is this awards quest worth compared to what the company is spending? Maybe it adds up, in Netflix-onmics anyway. We all get bent out of shape by the wanton excess, but by tech world standards, this is the snack room budget at the server farm. Say it spends $100 million this year on awards-related expenses? What is that for them? Half their Michael Bay movie? Isn’t it worth half a Michael Bay movie to get lots of press for winning lots of awards?

But ultimately, in a newly competitive world, can Netflix really keep living this way? At some point, the economics have to add up not by magical Netflix standards but by the same economics that the rest of the world lives under: What kind of return do you get on your expenditures, relative to your immediate competition? Netflix’s hit machine was not matched by any brilliant ROI, to say the least, as its PE ratio remains five to ten times higher than its competitors. Which is why it’s hard to see how stuff like Awards Season orgies and Michael Bay movies that no one will watch are going to be part of the long term plan for Netflix, fun as they may be right now.

So if you were sitting down at the poker table today, would Netflix’s hand be the one you’d claim? On the plus side, there are still some amazing pluses: a risk-taking culture in production, those tens of millions of subscribers, having established themselves as the name that means streaming, the showrunner contracts that could potentially pay off, the best technology and data of them all, and still a bottomless well of cheap cash to drink from.

On the downside you’ve got a host of competitors entering the field with production budgets that collectively no longer make Netflix’s seem so special; a newly competitive market for talent, and even more scary, for library content, resulting in the upcoming departures of shows that fuel a good core of The App’s viewing time; the Disney brand coming directly after Netflix’s most important demo (no, not film critics): the family audience; the fact that while there might be plenty of planet left, there’s not plenty of it that’s going to pay Western World subscription fees; the fact that after its tens of billions spent, the Netflix back catalog that it's building to replace the studio material that would someday leave is still a very mixed bag, extremely mixed without much that would go for, say, Law and Order money if it came to that.

The fact is, and this goes beyond Netflix, we’ve got an entire entertainment economy here built on valuations that are based on a fantasy of entertainment monopolies. Neither Spotify nor Netflix for all their subscriber lists are profitable enough or have laid out any clear road to massive profitability, to justify their market prices. On these valuations, the money flows into the entertainment ecosystem. The thought of what happens should Wall Street take a dramatic downturn should scare the heck out of everyone here.

But given all its strengths, Netflix isn’t going to just go away, right? If all those financials approached crisis level, someone would want to snatch it up, right? The question is who? At anything resembling the current valuation, you’d have to look to the tech world for a company able to afford it. But Apple is off on its own journey of finding out why people don’t go into the movie and TV business. Amazon, likewise, has its own plan and didn’t get to be Amazon by paying top-dollar for big-name acquisitions. Facebook is still sitting there with one toe in the content game. In theory, entertainment fits with its strategy over the years, but then its hard to see any government letting Facebook acquire anything bigger than a tube of toothpaste anytime soon.

Here in Hollywood, Disney is all set right now, thanks. The Phone Company is already choking on debt. Netflix is too at odds with Comcast’s core cable business. Sony and Viacom are . . . not in that place, shall we say.

So whom?

At some point, the belt-tightening is going to have to kick in, and the question is: How does that not trigger a death spiral? Given the way things are looking, The Ankler’s prediction is that that is a crossroads the App is going to reach sooner rather than later.

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