When Netflix first launched its streaming operations in 2007, it was a revolution in the media industry, but today, the company is just one of over 200 streaming services worldwide.

Saturation in the streaming market is nothing new for consumers—they’ve been complaining about having too many streaming options for years—but Netflix managed to navigate the competition, expanding abroad to deliver repeated subscriber increases for investors.

That all ended on Wednesday when the company revealed it lost 200,000 subscribers in the first quarter of 2022, and expects to lose another 2 million over the next few months. 

Shares of Netflix plunged 35% after its earnings release, bringing the company’s year-to-date losses to roughly 62%, and making it the worst performer in the S&P 500 so far this year.

The losses led to a wave of analyst downgrades for Netflix, and had investment banks sounding the alarm about the whole sector.

“It looks like dark clouds are gathering for the streaming industry,” Ipek Ozkardeskaya, a senior analyst at the Swiss online bank Swissquote, told Fortune. “The fierce competition hints that the industry metrics could get worse before they get better.”

A crowded field

Bank of America analysts, led by Alexander Lin, wrote in a note on Wednesday that they believe key streaming markets in the U.S. and EU have become too saturated for Netflix to continue its growth trajectory. 

“It will be very hard to find many new subscribers in these markets in the near to medium term,” the analysts added.

And UBS Global Wealth Management’s chief investment officer, Mark Haefele, said in a Thursday note that he sees Netflix’s poor results as a warning for the whole consumer technology space.

“We see this as a sign of broader challenges this year for consumer technology, with some subscription services getting closer to market saturation,” he said. 

Other streaming stocks have taken a hit as a result of Netflix’s poor performance, a sign that investors fear competitors like Amazon Prime, Hulu, and NBC’s Peacock will also be susceptible to subscriber losses moving forward. Shares of Disney and Roku are down 9% and 18%, respectively, since the Netflix news dropped, while Warner Bros. Discovery, the owner of HBO Max, has seen a 15% slide over the same period. 

“It is clear that we are now post peak-stream,” Charlotte Newton, a thematic analyst at GlobalData, told MarketWatch, adding that streaming services are “throwing money at the problem” and “chasing a dwindling number of subscribers.”

The future of streaming

It’s not that consumers don’t love streaming services. They definitely do.

In 2021, U.S. households subscribed to 3.6 streaming services on average, according to Kagan, a media research group. And Americans watched nearly 15 million years—that’s right, years—of streaming video content in 2021 alone, Nielsen’s State of Play streaming study revealed in April.

Streaming providers are also steadily increasing their share of consumers’ total TV time as the cable market continues to fade, the Nielsen study found. But the rise of the industry is leading to ever-increasing competition, and that’s a problem for top players like Netflix or Amazon Prime.

Ozkardeskaya thinks that streaming companies will be ultimately be forced to shift toward ad-based models to compete in the saturated market, and mergers between services with “bigger players eating smaller ones” are likely.

For years Netflix stood firmly against advertising on its platform, but now, with competition growing, the company has had a change of heart. And it’s not the only one—NBC’s Peacock,  Disney+, and other major streaming services are jumping on the advertising bandwagon, too. 

“Over the last 10 years, we’ve seen a rapid expansion of SVOD [subscription video on demand],” Colin Dixon, an analyst at nScreenMedia told Investor’s Business Daily on Thursday. “Now it’s advertising-supported streaming’s turn. You’re going to see an equally rapid expansion, if not more rapid expansion, of ad-supported [streaming video] than we did with non–ad supported.”