What next for Netflix?

The financial press was buzzing with news that Netflix's share (or stock price for US readers) had fallen significantly after less than stellar results on Thursday. Barron's wrote: "The streaming video giant’s shares are trading sharply lower after hours on Thursday amid signs that the company’s Covid-19 driven growth spurt is coming to an end"

Netflix simply hadn't added enough subscribers to meet analyst's expectations, causing the shares (or stocks) to take a nosedive. Barron's went on to say: "Netflix added 10.1 million net new subscribers, above the company’s forecast of 7.5 million, but falling short of Wall Street estimates that had reached 12 million or higher."

I think slowing subscriber growth is part of a much bigger problem for Netflix. I'll explain why:

Bigger (and tougher) competition

Streaming is a much tougher business for Netflix in 2020. In the UK, for example, we have a choice of BritBox, Disney+, Amazon Prime Video, Now TV, All 4, BBC iPlayer, Apple TV Plus, Netflix, UKTV Play and so on. 

Some of these are free (like All 4 and UKTV Play), with the rest offering competitive pricing. We are no longer tied down to Netflix and are free to choose a rival streaming service should we so wish. 

In the US, the choice is even greater with streaming services ranging from live TV like Sling TV to more traditional streaming services such as HBO, Hulu, Disney+ and Netflix. U.S. News has a great post on them. 

Unfortunately for Netflix, many of these competing services are funded by companies with deep pockets (Disney, Apple and Amazon) and the content needed to attract fans to their service. Disney, in particular, has been able to leverage the popularity of brands such as Star Wars and Marvel to build a large subscriber base quite quickly. In May, the company reported Disney+ had over 54.5 million subscribers, according to CNBC

Quality Not Quantity

I think a major reason for Netflix's decline is that consumers have become more discerning and won't watch just anything. The days of pumping out content for the sake of attracting eyeballs are slowly going away and Netflix will have to adapt. 

Disney understands this, as does Amazon and Apple is getting there. 

Amazon Studios, in particular, has done well with shows like Transparent and The Marvelous Mrs. Maisel receiving critical acclaim. Films such as Manchester by the Sea and The Salesman have won accolades and helped attract subscribers to the service. 

Apple TV+ is aiming to bank on the appeal of unique content starring a raft of Hollywood talent. Reception to some of its earlier shows like The Morning Show has been mixed but the service could be huge once Apple finds its feet. 

Will Things Get Worse For Netflix?

COVID-19 has been a boon for streaming providers. Large numbers of families unable to go outside have consumed streamed content like never before. 

As things slowly return to normal, Netflix will find itself under ever greater pressure to grow. There are only so many subscribers that can be signed up, only so many new markets to try and grow in. 

What do you think? Will things get better or worse for Netflix?

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