Netflix (NASDAQ:NFLX) has a problem.

The dominant streaming service is set to lose its two most popular shows, Friends and The Office, over the next two years. At the same time, the company is about to face an onslaught of streaming competition from the likes of DisneyAT&TComcast, and Apple. AT&T is reclaiming Friends for its new HBO Max streaming service, launching next spring, while The Office will disappear from Netflix streams in January 2021 to join NBCUniversal's new service, set to debut next year.

Predictably, plenty of Netflix subscribers were displeased with the departure of their favorite shows.

Netflix has been preparing for the loss of its syndicated network content for a long time, however. It's been transitioning from offering primarily second-run licensed content to first-run original programming, spending billions a year to build up its own original content library.

In the most recent earnings call, management sought to downplay the threat from losing Friends and The Office, noting that licensed shows have always rotated on and off the service and that the company has lost popular shows before without an impact to its subscriber growth. It also said that no single show contributes more than a low-single-digit percentage of total viewing hours, noting that in the past when the service had lost popular content, subscribers just moved on to something else.

Image source: Netflix.

There's a blind spot

However, there's something unique about Friends and The Office for Netflix. For all the billions that Netflix spends on content -- a whopping $12 billion last year, and a projected $15 billion this year, much of it on originals -- its selection is utterly underwhelming, and plenty of subscribers and critics have said as much. Friends launched 25 years ago, while the U.S. version The Office debuted in 2005, yet rating services like Nielsen say that both shows still command more eyeballs from Netflix's 152 million subscribers than anything new the company is churning out, even original hits like Stranger Things.

There's a good reason for that. Leaving the actual content of each of those hit sitcoms aside for a minute, both of those shows bring viewers a type of television that Netflix's own originals almost universally lack: They're comforting. Like an old teddy bear, they've always been there for viewers. Fans know these characters -- whether it's Chandler and Ross or Jim and Pam -- like they know their best friends. That's why there are reports that watching these shows before bed has become something of a ritual for millennials, as a dose of The Office or Friends provides a familiar way to ease into slumber. Netflix's own content, the majority of which seem to be serialized dramas that demand viewers' attention to follow plotlines, makes no attempt to meet the demand for such comforting, easy-to-watch shows that can be streamed over and over and over. 

The bingeing dilemma

There's another advantage that Friends and The Office have over Netflix's own original programming: These shows came of age in the pre-streaming era. They aired every week on NBC for nine or 10 years. Being on the air for that long and with that kind of regularity helps make a hit show into a cultural phenomenon, a source of memes, jokes, and references for an entire generation. When these shows were on the air, fans discussed them regularly, and there was buzz around the shows for the entire run of original episodes. The millennials who love these shows will probably remain devoted fans for the rest of their lives, much in the way people tend to remain attached to the music they loved as teenagers. 

For Netflix then, part of its problem may be that its very own bingeing model, which is what made the company so disruptive in the first place, is actually a double-edged sword. Though streaming and the bingeing model give the user the most control over how and when they watch a show, it ultimately brands the content as disposable, fit to be watched in a weekend, rather than something meted out methodically over several weeks during an entire school year to build drama and provoke conversation. 

To use a personal example, when I was in high school my friends and I would watch Seinfeld every Thursday night when new episodes would come out. At school the next day, we would talk about the episode and repeat our favorite jokes. That ritual helped establish my own lasting fondness for the series, and I still enjoy watching reruns today. The problem with bingeing is that you can't have that next-day conversation, because by definition everyone is watching it at different times. Television stops being a communal experience.

I recently watched the Netflix psychological dramedy Russian Doll starring Natasha Lyonne, all eight episodes of it, in just one weekend. I enjoyed the show, and critics raved about it -- it rates 96% on Rotten Tomatoes. But because I watched the whole season in such a small period of time, it's not going to stick with me in the same way a show I watched regularly one week at a time over an extended period of time would.

Netflix's most recent quarter, in which U.S. streaming subscribers fell for the first time ever, makes it clear that the company needs to start experimenting again. If it can devote $15 billion to content, it can afford to take a few risks like scheduling some potential hits to stream programmatically, with new episodes coming out every week rather than all at once. That would give those shows the greatest chance to build the kind of appointment television -- what NBC called "Must See TV" in the era of Seinfeld, Friends, and The Office -- that drives conversation around the water cooler and in the media.

The Netflix U.S. subscriber decline shows that members are getting tired of being saturated with so many serialized dramas and so much disposable content. The service needs to boldly expand the breadth of its original programming and recognize that not every season of every show needs to be immediately bingeable. With new competition about to test it like never before, Netflix needs to prove to its 152 million worldwide subscribers that the service is worth every penny.

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Jeremy Bowman owns shares of Netflix and Walt Disney. The Motley Fool owns shares of and recommends Apple, Netflix, and Walt Disney. The Motley Fool has the following options: long January 2021 $60 calls on Walt Disney, short October 2019 $125 calls on Walt Disney, short January 2020 $155 calls on Apple, long January 2020 $150 calls on Apple, short January 2020 $155 calls on Apple, and long January 2020 $150 calls on Apple. The Motley Fool recommends Comcast. The Motley Fool has a disclosure policy.