Living in the Upside Down is what we must do. Legacy media has disrupted Netflix.

Netflix announces Tuesday it’s exploring adding a lower-priced, advertising-based tier to its service. This has placed the world’s biggest streaming video service in a unique position: it follows the lead of legacy media.

ComcastAnd Disney-owned Hulu is the founding father of advertising-supported streaming. These days, Warner Bros. DiscoveryNBCUniversal’s Peacock are the streaming services that provide the most content (HBO Max & Discovery+). Paramount GlobalParamount+, Paramount+ launched all with ad-based pricing tiers at a much lower cost than commercial-free products. Disney last month announced Disney+ will offer an advertising-supported product.

Over the last four years, legacy media has been reorganizing its businesses in order to be competitive with Netflix. Netflix streaming was the preferred model for entertainment consumption. They were the companies saw Netflix trade at sky-high multiples, leading to a soaring stock price, no matter how much it spent on content.

This resulted in a package of enormous companies shifting focus to compete directly against NetflixInstead, we should protect the Pay TV Bundle which has been the crown jewel of our industry.

In the streaming world, Netflix looks like the incumbent — struggling with saturation and an aging core service. Entertainment companies looking to expand their market share may find this disappointing.

The optimistic goal for legacy media companies has been to attain the same type of trading multiples as Netflix — an “everybody wins” scenario. Netflix has been beaten by entertainment competitors, as it seems for the moment. first-quarter earnings updateIts slower growth is due to increasing competition.

Netflix shares dropped more than 35% during morning trading Wednesday. This brought its market capitalization to $100 billion below 2018’s 2018.

If a company relies solely on subscription gains like Netflix it is almost certain that the music will cease. A company cannot sustain its subscriber growth for ever. When saturation hits, it is.

This seems to be what Netflix has seen happen. It lost more subscribers than in 10 years during its first quarter, and it projects a loss of 2,000,000 subscribers for the second quarter.

Netflix’s CFO Spencer Neumann, who was speaking just prior to Tuesday’s earnings conference, reassured investors that Netflix would still have enough subscribers in the next year. — This is a remarkable consolation considering that Netflix was expected to grow its net subscriber base by nearly 20,000,000 in 2022, according to most analysts.

Neumann declared that “there will be paid net addition growth.” “I only want that to be understood.”

Ted Sarandos (Co-CEO) stated Tuesday that he couldn’t see a way to make money in sports. But Netflix seems to have gotten into the habit for changing beliefs. Netflix ignored password sharing for many years — and that’s changing now too.

Netflix can’t look and act like other entertainment companies. This will cause it to become disrupted. Video gaming is not a key area of innovation that Netflix has repeatedly emphasized, but it’s still unclear if this will make Netflix stand out from its competitors.

It seems that the industry is more uncertain than it was a year ago when trading like Netflix was a common goal. The speculation is rampant the streaming wars will lead to more consolidationIt’s not clear if regulators will allow such deals.

Although media companies may have rallied behind the protection of the pay TV bundle, they run the risk that the future is ceded to Netflix and other technology giants. This decision has now been taken, no matter if it was the right one.

The multiple growth that legacy companies had hoped for has not been realized by Netflix’s move to streaming. Netflix is falling, and so do its new peers. Paramount Global lost more than 7% on Wednesday. Warner Bros. Discovery fell more than 5%. Disney fell 4.5%.

Netflix may have been impacted by legacy media. However, the whole entertainment industry was left in an existential crisis. So what do we do?

WATCH: Netflix is not making 500 million dollars from its viewers according to Jim Cramer

Disclosure: Comcast owns NBCUniversal and is parent company to CNBC.