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While Reed Hastings, the chairman and co-founder of Netflix, said in a recorded presentation on April 19 that the company would get through these hard times, he acknowledged that it needed to think differently. “Those who follow Netflix know that I’ve been against the complexity of advertising and a big fan of the simplicity of subscription,” he said, in something of an understatement. “But as much as I’m a fan of that, I’m a bigger fan of consumer choice, and allowing consumers who would like to have a lower price and are advertising tolerant get what they want makes a lot of sense. So that’s something we’re looking at now. We’re trying to figure out over the next year or two.”

Several years ago, he claimed that Netflix’s most formidable adversary was “sleep.” The company offered so much binge-worthy entertainment that people were giving up sleep to watch it. “We’re winning!” he said then.

Netflix is no longer winning. Services like YouTube, Hulu, Amazon Prime, Disney Plus, ESPN+, Apple TV+, Paramount+ and Peacock are coming on strong. “Really we’ve got great competition,” he said on April 19. “They’ve got some very good shows and films out, and what we’ve got to do is take it up a notch.”

Throwing money at the problem is no longer the answer, however. Netflix also acknowledged that, with its growth slowing, it needed to “moderate” its spending. It must do so if it is to create sufficient cash flow to carry its $14.6 billion debt load. The combination of mounting debt and insufficient cash flow was what I warned about in 2018. Now, the company’s balance sheet is in better shape. It retired $700 million in debt in the last quarter. And it says it intends to pay for operations, capital expenditures and debt costs from money it generates itself, making it “free cash flow positive” for an entire calendar year for the first time.

Moody’s rated its debt as below investment grade, or “junk,” while S&P moved it up to investment grade last year. The company is likely to be “volatile,” Moody’s said on April 21, adding that it expects the company to be disciplined in its use of cash.

Netflix had been buoying its own stock by buying back shares, but said that because of its cash flow constraints, it has not done so this year. This past week, it began laying off employees.