Netflix reported its earnings on Tuesday, and it was one of those good news, bad news deals. Except it was mostly just bad news. But since there was less bad news than before (and less than people expected), it was kind of good news. 

The whole thing is quite instructive. If things are going bad, and you tell people they are going bad, and then they are less bad than you thought they would be, everyone will say things are going good. That's because most of the time, we don't measure things in terms of their absolute value, but in terms of how far they deviate from our expectations.

If something is exactly as we expect, that's fine. If it falls short, that's very bad. If it's better than we expected, even if it's still bad, somehow we think of that as good news.

Make no mistake, for Netflix, the numbers were bad. There's a reason they call it bad news. It's not good. Netflix lost almost a million subscribers (970,000 to be precise). That means that a million people who were giving Netflix money every month decided it just wasn't worth it. If you're a business built on the idea that people will just keep forking over $15 a month forever, there's nothing good about that news. 

The thing is, everyone expected things to be even worse than they were. Obviously, losing a million subscribers isn't a good thing, but it's better than losing two million -- which is the number the company had forecasted.

If you think you're going to lose two million subscribers, and you tell people that you're going to lose two million so that they won't be mad when it happens, and then only one million cancel their account -- you'll probably be happy because things were better than you expected. And expectations, it turns out, are everything. 

Things have been rough for Netflix for a while now. Earlier this year, the company reported a loss of 200,000 subscribers, the first time that had happened in a decade. The company's stock fell 25 percent as a result. It's down a little over 70 percent from its all-time high back in October. 

For two years, the company kept adding record numbers of subscribers -- largely fueled by the pandemic and the fact that no one was leaving their house. If your business is making it easy for people to find something to watch when they have nothing else to do, your business is going to do well during a lockdown.

There is an obvious problem, however. Two, actually. The first is that once you've signed up everyone who is likely to pay for your service, you have very little room to grow

Basically, Netflix just grew until it couldn't grow anymore. That's not surprising -- with more than 220 million subscribers, and another 100 million the company estimates are sharing passwords, there's just no one left to sign up for Netflix. Everyone who wants a Netflix account is either already paying for one, or freeloading on someone else's.

The other reason is that once people start leaving their house again, they might not think your stay-at-home entertainment service is worth $15 every month. Multiply that by the fact that basically everyone has a streaming service now, and consumers start making tough choices. Some of them will leave. 

None of this is particularly complicated or surprising. It was only surprising in April because it had never happened to Netflix before. The world's largest streaming service seemed immune from the usual business forces. It just kept growing until it didn't. 

Netflix is doing all sorts of things to try to grow again, including announcing that it will soon offer a lower-priced ad-supported tier. It's also cracking down on password sharing in an effort to encourage freeloaders to sign up for their own account, or at least convince mom and dad to start paying extra for the privilege of letting their college student use their account.

In the meantime, the smartest thing the company did was acknowledge that its most recent growth was an anomaly, and wouldn't last forever. Not only that, it managed expectations by forecasting that it would likely lose subscribers. Then, it managed to do better by losing fewer subscribers than it forecasted. It turns out, losing a million subscribers was the best news it has had in a while.