Anorak News | The Future of Netflix: Competition Does Not Sleep

The Future of Netflix: Competition Does Not Sleep

by | 26th, April 2019

158 million – the number of Netflix subscribers around the world, not counting all the passwords exchanged, shared accounts, and collective visions. Netflix is the home of global entertainment, not only of movies but of TV series as well. In the first quarter of 2019, Netflix scored positively in all aspects, especially considering the growing number of new customers. However, the outlook of this streaming service does not look quite so good, as we have to take into consideration the competition.

Competition is an important and tricky topic in any sector. Customers are always testing new platforms and new products, even if they have a favourite one. This is the case not only of streaming services, but also of online casinos where players test games with no deposit bonus codes, or of new music streaming platforms, such as Spotify & Co., where fans search for their favourite artists. 

The History of Netflix

Founded in 1997, Netflix’ main and original activity was the DVD and video game rental. People could book disks on the internet and receive them directly at home by mail. In 2000, Blockbuster, a leading company in the field of video rental stores, offered 50 million to buy Netflix, but the latter refused the offer and continued its own business path. 

Since 2008, Netflix has activated an online streaming service on demand, accessible by subscription. This is the beginning of the challenge between the two companies. The end of the story is known, with Blockbuster declaring bankruptcy in 2010, while Netflix continues to grow exponentially

Netflix: What now?

Netflix expects slower user growth after a strong start this year. The world’s leading online video service, which has made a name for itself with series successes such as “House of Cards” and movies like “Bird Box”, is facing a heightened competition. In addition to established rivals like Amazon or Hulu, Disney and Apple are pushing new adversaries into the booming market of Internet television. And even worse: In this critical phase, Netflix is raising prices – definitely a risky manoeuvre. But Chief Executive Reed Hastings is not afraid.

So far, there is no real reason for it. In the first quarter, Netflix had 9.6 million new subscriptions. Overall, Netflix had nearly 149 million paid memberships by the end of March 2019. However, the trend is now sinking, due also to the price increase announcements. This will noticeably slow down user growth in the current and next quarters.

For instance, Netflix announced 5 million new memberships in this current quarter, disappointing experts’ expectations. This was not a good thing for investors; for instance, the stock of the company went down. However, Netflix had a good run with a stock price increase of about 34 percent since the beginning of the year, so that the market reaction is – for now – not very meaningful. The profit of Netflix indeed climbed from 290 million to 344 million dollars in the first quarter of 2019. 

Netflix: New Competitors, Fewer Users?

Nevertheless, it can not be ignored that the market environment for Netflix should be more uncomfortable in the future. With Disney and Apple new rivals – also financially very strong – that will attack the streaming market leader, the situation will not be easy. Both the Mickey Mouse group from Hollywood and the iPhone giant from the Silicon Valley recently presented competing offers that leave no doubt about their big ambitions. In addition, also WarnerMedia attacks with its renowned pay-TV channel HBO  under the corporate roof of Telecom AT&T.

Netflix boss Hastings is clear about what is going on in his company but is combative. In his letter to shareholders, he described Apple and Disney as “world-class brands” against which Netflix would like to compete. Moreover, he does not expect the new counterparties to impact the growth of Netflix significantly. “We believe we’ll all continue to grow as we each invest more in content and improve our service and as consumers continue to migrate away from linear viewing,” said Hastings. The top manager had already emphasised in the past that the streaming market was big enough for several competitors.

The two-year period 2019-2020 will probably be important and decisive to define the future of the platform and in general of the use of home and personal entertainment. No one is a magician or a fortune teller, so predicting today what the impact of this increase in services will be complicated, if not impossible. The consumer is in danger of finding himself lost among so many proposals, with the difficulty of choosing what to subscribe to and for how long, trying to chase what will be the current fashion. Today is Netflix, tomorrow who knows.

Posted: 26th, April 2019 | In: Money, TV & Radio Comment | TrackBack | Permalink