Best of the Week
Most Popular
1. US Housing Market Real Estate Crash The Next Shoe To Drop – Part II - Chris_Vermeulen
2.The Coronavirus Greatest Economic Depression in History? - Nadeem_Walayat
3.US Real Estate Housing Market Crash Is The Next Shoe To Drop - Chris_Vermeulen
4.Coronavirus Stock Market Trend Implications and AI Mega-trend Stocks Buying Levels - Nadeem_Walayat
5. Are Coronavirus Death Statistics Exaggerated? Worse than Seasonal Flu or Not?- Nadeem_Walayat
6.Coronavirus Stock Market Trend Implications, Global Recession and AI Stocks Buying Levels - Nadeem_Walayat
7.US Fourth Turning Accelerating Towards Debt Climax - James_Quinn
8.Dow Stock Market Trend Analysis and Forecast - Nadeem_Walayat
9.Britain's FAKE Coronavirus Death Statistics Exposed - Nadeem_Walayat
10.Commodity Markets Crash Catastrophe Charts - Rambus_Chartology
Last 7 days
The AI Mega-trend Stocks Investing - When to Sell? - 28th May 20
Trump vs. Biden: What’s at Stake for Precious Metals Investors? - 28th May 20
Stocks: What to Make of the Day-Trading Frenzy - 28th May 20
Why You’ll Never Get Another Stimulus Check - 28th May 20
Implications for Gold – 2007-9 Great Recession vs. 2020 Coronavirus Crisis - 28th May 20
Ray Dalio Suggests USA Is Entering A Period Of Economic Decline And New World Order - 28th May 20
Europe’s Coronavirus Pandemic Dilemma - 28th May 20
I Can't Pay My Payday Loans What Will Happen - 28th May 20
Predictive Modeling Suggests US Stock Markets 12% Over Valued - 27th May 20
Why Stocks Bear Market Rallies Are So Tricky - 27th May 20
Precious Metals Hit Resistance - 27th May 20
Crude Oil Cuts Get Another Saudi Boost as Oil Demand Begins to Show Signs of Life - 27th May 20
Where the Markets are heading after COVID-19? - 27th May 20
Silver Springboards Higher – What’s Next? - 26th May 20
Stock Market Key Resistance Breakout Is Where the Rubber Meets the Road - 26th May 20
5 Ways To Amp Up Your CFD Trading Today - 26th May 20
The Anatomy of a Gold Stock Bull Market - 26th May 20
Stock Market Critical Price Level Could Soon Prompt A Big Move - 25th May 20
Will Powell Decouple Gold from the Stock Market? - 25th May 20
How Muslims Celebrated EID in Lockdown Britain 2020 - UK - 25th May 20
Stock Market Topping Behavior - 24th May 20
Fed Action Accelerates Boom-Bust Cycle; Not A Virus Crisis - 23rd May 20
Gold Silver Miners and Stocks (after a quick drop) Ready to Explode - 23rd May 20
3 Ways to Prepare Financially for Retirement - 23rd May 20
4 Essential Car Trade-In Tips To Get The Best Value - 23rd May 20
Budgie Heaven at Bird Land - 23rd May 20
China’s ‘Two Sessions’ herald Rebound of Economy - 22nd May 20
Signs Of Long Term Devaluation US Real Estate - 22nd May 20
Reading the Tea Leaves of Gold’s Upcoming Move - 22nd May 20
Gold, Silver, Mining Stocks Teeter On The Brink Of A Breakout - 21st May 20
Another Bank Bailout Under Cover of a Virus - 21st May 20
Do No Credit Check Loans Online Instant Approval Options Actually Exist? - 21st May 20
An Eye-Opening Perspective: Emerging Markets and Epidemics - 21st May 20
US Housing Market Covid-19 Crisis - 21st May 20
The Coronavirus Just Hit the “Fast-Forward” Button on These Three Industries - 21st May 20
AMD Zen 3 Ryzen 9 4950x Intel Destroying 24 core 48 thread Processor? - 21st May 20
Dow Stock Market Trend Analysis and Forecast - 20th May 20
The Credit Markets Gave Their Nod to the S&P 500 Upswing - 20th May 20
Where to get proper HGH treatment in USA - 20th May 20
Silver Is Ensured A Prosperous 2020 Thanks To The Fed - 20th May 20
It’s Not Only Palladium That You Better Listen To - 20th May 20
DJIA Stock Market Technical Trend Analysis - 19th May 20
US Real Estate Showing Signs Of Covid19 Collateral Damage - 19th May 20
Gold Stocks Fundamental Indicators - 19th May 20
Why This Wave is Usually a Market Downturn's Most Wicked - 19th May 20
Gold Mining Stocks Flip from Losses to 5x Leveraged Gains! - 19th May 20
Silver Price Begins To Accelerate Higher Faster Than Gold - 19th May 20
Gold Will Soar Soon; World Now Faces 'Monetary Armageddon' - 19th May 20

Market Oracle FREE Newsletter

Coronavirus-stocks-bear-market-2020-analysis

Netflix’s Worst Nightmare Has Come True

Companies / Tech Stocks Jul 10, 2019 - 04:40 PM GMT

By: Stephen_McBride

Companies

If there were a stock market “hall of fame,” Netflix (NFLX) would be a shoe-in.

Its stock has soared 8,500%+ in the last decade as “streaming” video has caught fire.

Netflix achieved those gains by stealing tens of millions of customers from cable companies. Last year, half of Americans age 22–45 didn’t watch a second of cable TV. And 35 million Americans have dropped cable in the last decade.

But it’s time to come to terms with a sad truth...

Netflix’s glory days are over. And what’s coming next won’t be pleasant if you own Netflix stock.


Until recently, Netflix was the only real streaming game in town. Not only did it enjoy virtually zero competition. Many of the biggest, most powerful media companies on earth helped Netflix build its business.

Netflix founder Reed Hastings did a lot of things right. But his most genius move was leasing shows and movies that other companies produced.

In the early 2010s, Netflix signed deals with movie and TV makers like Disney and NBC. For a small fee, Netflix bought the rights to air wildly popular content like the Marvel Avengers movies... and hit comedies like The Office and Friends.

In other words, Netflix built its business on the back of other companies’ content. And it worked incredibly well. Netflix now has 149 million subscribers—more than any cable company.

But this world is now gone.

One by one, Netflix’s colossal competitors have woken up. They’re ending their contracts with Netflix, taking back control of their content, and launching their own streaming services that will compete with Netflix.

This is happening right now. Have you heard about Disney’s new streaming service, Disney+? Launching later this year, it’ll be the new home of the world’s most popular movies.

Although Disney is best known for Mickey Mouse, it owns the greatest portfolio of movies ever assembled.

The 3 best-selling movies so far this year are Avengers: Endgame, Captain Marvel, and Aladdin.

Disney owns all 3.

The 3 best-selling movies of 2018 were Black Panther, Avengers: Infinity War, and Incredibles 2.

Disney owns all 3.

The 3 best-selling movies of 2017 were Star Wars: The Last JediGuardians of the Galaxy 2, and Beauty and the Beast.

Disney owns all 3.

Except for the newest ones, all these wildly popular movies are currently on Netflix. By the end of this year, they’ll be removed from Netflix for good. To watch them, you’ll have to get a Disney+ subscription.

Disney+ will cost $6.99/month—or around half the price of Netflix’s most popular subscription.

Netflix’s Best Content Is Being Gutted

Netflix investors should be equally worried about AT&T’s new streaming service that launches in 2020. It’ll cost slightly more than Netflix at $16–17 month.

AT&T is best known as a cell phone company. But its purchase of WarnerMedia in 2018 turned it into a media powerhouse. It owns HBO, the most successful premium TV network ever. HBO continues to pump out all-time hits like The Sopranos, Game of Thrones, and Sex in the City.

Remember, Netflix achieved its incredible success by being first in streaming. It's a true disruptor stock that revolutionized TV. For years it essentially “owned” the mechanism of airing TV and movies over the internet.

Now that others have caught up, the game has changed. Soon customers will have lots of streaming services to choose from. They’ll choose the ones with the best content.

And Netflix is losing its best content!

It’s not just Disney movies that Netflix is losing. Over the next two years its whole library will be gutted.

According to The Wall Street Journal, the most watched show on Netflix is The Office.

Netflix does not own The Office. NBC Universal owns The Office.

NBC Universal is launching its own streaming service and pulling The Office off Netflix for good by the end of next year.

Another extremely popular show on Netflix is Friends.

Friends is owned by WarnerMedia, which, as I mentioned, is now owned by AT&T.

Friends will be pulled off Netflix for good in 2020.

Losing The Office and Friends is bad, but it’s just scratching the surface. According to analytics firm Jumpshot, more than half of Netflix’s 50 most popular shows are owned by companies planning to launch their own streaming services.

Do you see what’s happening here?

Netflix is losing all the best movies and TV shows.

How could this not cripple it?

Netflix sees the writing on the wall, and is spending gobs of money to reinforce its own content library. It spent $12 billion last year, and it expects to spend another $15 billion this year.

It now invests more in content than any other American TV network. But it’s come at a steep cost. To fund its new shows, Netflix is borrowing huge sums of money. Over the past year its debt has shot up 58% to $10.3 billion. For perspective, Netflix earned $1.2 billion in profits last year.

Unfortunately, no matter how much it spends, it can’t hope to compete with Disney or AT&T. Netflix is in an impossibly tough spot.

Can Netflix survive?

Netflix’s market cap is about $165 billion—making it the 30th-biggest publicly traded US company.

It got there through domination of streaming which, as I’ve shown, is a thing of the past.

Going forward it will succeed or fail on the popularity of the TV shows and movies it produces.

Let’s assume it succeeds and creates a ton of content people love. The problem is, companies that produce TV shows and movies are not worth anywhere near $165 billion.

Even wildly successful film studios are worth tens of billions, max. In 2018 Walt Disney studios—which includes iconic brands like Marvel, Star Wars, and Pixar—generated $10 billion in revenue, and $2.98 billion in profit.

Netflix has one big advantage. It has already amassed a giant audience of 149 million paying subscribers. It’s far easier to keep a customer than to get one.

Netflix will survive. But it will shrink. Even in the most generous scenario, within a couple of years I can’t see it being worth more than $100 billion.

That would put its stock price at about $225/share—or about 40% below its current price.

Again, that’s a rosy scenario. Don’t be surprised if Netflix stock gets cut in half, or worse, in the next year or two.

Download my report The Great Disruptors: 3 Breakthrough Stocks Set to Double Your Money. These stocks will hand you 100% gains as they disrupt whole industries. Get your free copy here.

By Stephen McBride

http://www.riskhedge.com

© 2019 Copyright Stephen McBride - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules