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Netflix Idea Proposal (NFLX)

Netflix Idea Proposal (NFLX)
 

Will Netflix’s subscriber growth be slowed in 2019 by the proliferation of new content options such as Disney’s upcoming SVOD channels, or streaming devices like Roku that make competing OTT content easier to find?

Report Available: November 29, 2018

 

Blueshift’s initial research found NFLX bouncing back with strong subscriber growth in Q3, while offering some caution about Q4 profitability. NFLX will face major new competition in 2019 from DIS and AAPL. The growing popularity of ROKU streaming devices could also serve as a new layer of competition. NFLX is trying to stay ahead by spending big on content and marketing.

 

Observations

  1. NFLX rebounded from a disappointing Q2 by blowing past analyst estimates for subscriber growth in Q3. The streaming video giant added almost 7 million new subscribers worldwide, up an astounding 31% year-over-year, while streaming revenue jumped 36%. The performance sent NFLX shares soaring, even though the company warned that its Q4 profit would be significantly less than estimates, with slower revenue growth and higher costs for licensing and developing content.
  2. NFLX has easily beaten back all comers to emerge as the juggernaut of streaming entertainment, but the competitive landscape continues to get tougher. DIS is launching its Disney Play streaming service in 2019, bundling popular content from Pixar, Marvel and the Star Wars franchise. And DIS’s recent acquisition of some of FOX’s assets beefs up its already impressive portfolio. AAPL, meanwhile, is planning to launch a TV subscription service in the U.S. during the first half of 2019, with plans to eventually roll it out in more than 100 countries. The service, available to AAPL device owners, will provide access to original content that AAPL is developing, as well as allow consumers to buy other streaming subscriptions through its TV app. New entries from DIS and AAPL join an already crowded streaming field that includes “skinny bundles” from pay-TV operators, AMZN’s Prime Video, T’s HBO Go, and Hulu, jointly operated by DIS and CMCSA.
  3. One of the biggest complaints of cord cutters has been the difficulty in cobbling together a variety of streaming services to replace the pay-TV bundle. But set-top boxes from ROKU and AAPL, as well as USB devices like AMZN’s Fire Stick and GOOG/GOOGL’s Chromecast, are making it easier for consumers to aggregate all of their streaming content in one place. ROKU has emerged as a leader, reporting a 46% increase in its number of active accounts in Q2 and a 57% jump in the number of hours streamed by its users. The growing popularity of devices like ROKU’s could hurt demand for NFLX subscriptions because they make it so easy for consumers to access free streaming content as well as competing subscription services.
  4. To help stave off the various threats, NFLX continues to invest heavily in original programming. The company is spending about $8 billion to produce hundreds of new shows and movies in 2018 and announced recently that it plans to take on another $2 billion in debt to fund its programming development operations. To back the launch of all its new content, NFLX nearly doubled its marketing spending to $2 billion this year. NFLX had more than 40 shows nominated for Emmys this year and took home 23 awards.
  5. Content owners, distributors, and other sources in Blueshift’s Jan. 18 report said NFLX’s most recent price hikes would not put a dent in the streaming service’s subscriber growth. NFLX faces no immediate competitive threats and likely has room for even further price hikes in the coming years, sources said, as any major headwinds are well down the road. One source said NFLX will have to reshape its marketing efforts to push its hundreds of new shows and movies that it is churning out this year. In Blueshift’s March 19 update, sources said NFLX’s deal with Ryan Murphy was another sign of the streaming service’s growing clout in the battle for original content.

 

Will emerging competition start to take a toll on NFLX’s subscriber growth or retention? How popular will DIS’s new streaming service be? Will DIS Play be a complementary or competitive service to NFLX? What effect will AAPL’s subscription TV service have on the streaming market? Does the growing popularity of ROKU pose a threat to NFLX? To answer these and other questions, Blueshift will gather data and issue a market research report from independent sources in the following areas: Content owners and developers, Streaming video platforms, Pay-TV operators, and Industry specialists.

 

Companies: Netflix Inc. (NFLX), Alphabet Inc. (GOOG/GOOGL), Amazon.com Inc. (AMZN), Apple Inc. (AAPL), AT&T Inc. (T), Comcast Corp. (CMCSA), Roku Inc. (ROKU), The Walt Disney Co. (DIS), 21st Century Fox Inc. (FOX)

 

Research Begins: November 12, 2018

 

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