Budapest Post

Cum Deo pro Patria et Libertate
Budapest, Europe and world news

Analysis: The sky is falling for Netflix

Analysis: The sky is falling for Netflix

Just like its comedy film "Don't Look Up," the sky may be falling for Netflix.

Netflix's (NFLX) stock has tumbled 41% from the all-time high it hit just two months ago. It's gaining subscribers at a painfully slow pace. Competition is heating up.

The company's answer to all that: It just raised prices on North American customers.

After surging to the top of the streaming mountain, Netflix is struggling to climb higher as its rivals gain more ground.

"It looks like they're hitting maturity," Michael Nathanson, a media analyst at MoffettNathanson, told CNN Business. "They keep raising their prices, and now in order to maintain a level of subscribers they have, they continually add more and more new content, and content is inherently a hard business to predict with peaks and valleys."

Don't look up
"Don't Look Up" was a buzzy hit for Netflix, but subscribers were still sluggish.


It wasn't that long ago that Netflix was a stock darling, but those days now feel like eons ago. The company's stock peaked just south of $700 in November, but has since dropped to around $400 on Friday.

Netflix ended 2021 with 221.8 million subscribers. That's significantly more than others in the streaming marketplace, including Disney, one of its closest competitors. Disney had 118.1 million subscribers as of October, and it grew subscriptions 60% between October 2020 and October 2021. During that same period, Netflix grew just 9%.

Disney hasn't yet reported its financial results for the last three months of 2021. But Netflix's growth slowed even further in the fourth quarter to just 8%. (And Disney's growth last quarter spooked Wall Street too.)

Netflix is struggling to find more people to sign up in the markets it has been playing in the longest — particularly the United States — noted Nathanson. The company is going to have to "start aggressively going after growth in developing markets," such as India and other Asian Pacific countries, to keep moving forward, he added.

The problem with relying exclusively on subscriptions for revenue is: after a while, you run out of people who haven't subscribed. That's bad news for Wall Street investors who are mostly concerned with companies' abilities to grow.

Zak Shaikh, vice president of programming at research-based media firm Magid, believes that Netflix's fall is more of "a Wall Street thing" rather than "something that reflects the business is in trouble."

"They still added subs, and they still have the same high usage and viewing metrics," he added. However, even Shaikh pointed out that in the long term, "Netflix (NFLX) will have to deal with the fact that you can't keep adding subscribers."

One way the company has tried to offset its slowing growth is by investing in other verticals, such as gaming. Another way is to raise prices, but that could prove difficult as fierce competition ramps up.

Netflix's red notice
"Red Notice" hit Netflix in November and became one of its most watched films.


Although price increases will probably help to offset its sluggish sign ups, they could also lead to more stagnation for Netflix.

For some consumers, price increases — even small ones — are a lot to ask considering that so many competitors are at Netflix's gates. Rivals like Disney+, Peacock and HBO Max from CNN parent's company, WarnerMedia, are also vying for a share of consumer's streaming budget. A dollar here or there matters to consumer's wallets.

Netflix admitted as much on Thursday saying that competition is "affecting our marginal growth some."

On the post-earnings call on Thursday, Reed Hastings, Netflix's co-CEO, also explained that there were many reasons for the company's tepid financial outlook, which included "ongoing Covid overhang" and economic hardships.

But he also conveyed confidence in the future of streaming, as well as Netflix's large market size and steady execution.

"For now, we're staying calm," he said.

But will Hastings still be calm at the end of 2022? Will investors?

"The intensity of competition is going to pick up in 2022," Nathanson said. "You have sports being rolled out on streaming. You have Lord of the Rings coming from Amazon (AMZN). You've got Discovery and HBO Max merging, so more content there. And Disney's backend content slate is coming."

Nathanson added, "I think 2022 is going to be one of concern about growth and competition for Netflix."

AI Disclaimer: An advanced artificial intelligence (AI) system generated the content of this page on its own. This innovative technology conducts extensive research from a variety of reliable sources, performs rigorous fact-checking and verification, cleans up and balances biased or manipulated content, and presents a minimal factual summary that is just enough yet essential for you to function as an informed and educated citizen. Please keep in mind, however, that this system is an evolving technology, and as a result, the article may contain accidental inaccuracies or errors. We urge you to help us improve our site by reporting any inaccuracies you find using the "Contact Us" link at the bottom of this page. Your helpful feedback helps us improve our system and deliver more precise content. When you find an article of interest here, please look for the full and extensive coverage of this topic in traditional news sources, as they are written by professional journalists that we try to support, not replace. We appreciate your understanding and assistance.
Newsletter

Related Articles

0:00
0:00
Close
Emails Leaked: How Passenger Luggage Became a Side Income for Airport Workers
Polish MEP: “Dear Leftists - China is laughing at you, Russia is laughing, India is laughing”
Western Europe Records Hottest June on Record
BRICS Expands Membership with Indonesia and Ten New Partner Countries
Elon Musk Founds a Party Following a Poll on X: "You Wanted It – You Got It!"
China’s Central Bank Consults European Peers on Low-Rate Strategies
France Requests Airlines to Cut Flights at Paris Airports Amid Planned Air Traffic Controller Strike
Poland Implements Border Checks Amid Growing Migration Tensions
Emirates Airline Expands Market Share with New $20 Million Campaign
Amazon Reaches Milestone with Deployment of One Millionth Robot
Yulia Putintseva Calls for Spectator Ejection at Wimbledon Over Safety Concerns
House Oversight Committee Subpoenas Former Jill Biden Aide Amid Investigation into Alleged Concealment of President Biden's Cognitive Health
Amazon Reaches Major Automation Milestone with Over One Million Robots
Extreme Heat Wave Sweeps Across Europe, Hitting Record Temperatures
Meta Announces Formation of Ambitious AI Unit, Meta Superintelligence Labs
Robots Compete in Football Tournament in China Amid Injuries
China Unveils Miniature Insect-Like Surveillance Drone
Marc Marquez Claims Victory at Dutch Grand Prix Amidst Family Misfortune
Germany Votes to Suspend Family Reunification for Asylum Seekers
Budapest Pride Parade Draws 200,000 Participants Amid Government Ban
Southern Europe Experiences Extreme Heat
Xiaomi's YU7 SUV Launch Garners Record Pre-Orders Amid Market Challenges
Jeff Bezos and Lauren Sanchez's Lavish Wedding in Venice
Russia Launches Largest Air Assault on Ukraine Since Invasion
Massive Anti-Government Protests Erupt in Belgrade
Iran Executes Alleged Israeli Spies and Arrests Hundreds Amid Post-War Crackdown
Hungary's Prime Minister Criticizes NATO's Role in Ukraine
EU TO HUNGARY: LET THEM PRIDE OR PREP FOR SHADE. ORBÁN TO EU: STAY IN YOUR LANE AND FIX YOUR OWN MESS.
Hungarian Scientist to Conduct 30 Research Experiments on the International Space Station
NATO Members Agree to 5% Defense Spending Target by 2035
NATO Leaders Endorse Plan for Increased Defence Spending
U.S. Crude Oil Prices Drop Below $65 Amid Market Volatility
International Astronaut Team Launched to Space Station
Macron and Merz: Europe must arm itself in an unstable world
Germany and Italy Under Pressure to Repatriate $245bn of Gold from US Vaults
Iran Intensifies Crackdown on Alleged Mossad Operatives After Sabotage Claims
Trump Praises Iran’s ‘Very Weak’ Response After U.S. Strikes and Presses Israel to Pursue Peace
Oil Prices Set to Surge After US Strikes Iran
BA and Singapore Airlines Cancel Dubai Flights Amid Middle East Tensions
Trump Faces Backlash from MAGA Base Over Iran Strikes
Meta Bets $14 B on Alexandr Wang to Drive AI Ambitions
FedEx Founder Fred Smith, ‘Heart and Soul’ of the Company, Dies at 80
Chinese Factories Shift Away from U.S. Amid Trump‑Era Tariffs
Pimco Seizes Opportunity in Japan’s Dislocated Bond Market
Labubu Doll Drives Pop Mart to Status as China’s Most Valuable Toy Maker
Global Coal Demand Defies Paris Accord Goals
United States Conducts Precision Strikes on Iran’s Nuclear Sites
US strikes Iran nuclear sites, Trump says
Telegram Founder: I Will Leave My Fortune to Over 100 of My Children
16 Billion Login Credentials Leaked in Unprecedented Cybersecurity Breach
×