After reporting impressive gains in earnings, revenue and subscribers for the first quarter, the message from the pioneer of video streaming giant Netflix could not be clearer – it is still the leader in the leader in the streaming business.
And this is also being seen a clear message for the like of Disney, Amazon and Apple, who are now into the streaming business, along with numerous media and tech companies trying to gain toe hold in this segment of digital entertainment.
Netflix however issued a flat forecast for growth of subscribers for the second quarter which left its shares flat on Wednesday. On the overall however, there has been an increase of 30% in stock value for Netflix so far this year.
Analysts however also pointed out the typically the outlook set forth by Netflix is mostly low. Its performance also clearly indicates that the subscribers are not very worried about the recent price hike that it made in the United States, said analysts.
In a report titled “Chill about Netflix Churn Fears”, UBS analyst Eric Sheridan noted that in the first quarter more than expected US subscribers were added by Netflix. A monthly price increase for US subscribers was announced by it in January this year.
Its decision to increase its prices in Brazil, Mexico and some countries in Europe was also recently announced by it.
The move of the company now make and produce its own content has forced it to increase its subscription charges. The company also has to arrange for funding, without taking any debts, of an estimated $15 billion which analysts expects the company would be expending on shows and movies this year.
It’s worth noting that Netflix shares are still 15% below the all-time high the stock set last summer. The recent announcement by the likes of Disney, Apple and others of entering the streaming market had kept a number of investors on edge about the impact on the announcements on Netflix. Streaming plan is also being made by AT&T’s WarnerMedia, the parent company of CNN.
The launch of Disney+ in November and that of Apple TV+ service this fall has not deterred Netflix. In its earning letter to shareholders, the company noted that “we don’t anticipate that these new entrants will materially affect our growth,” primarily because the shift to streaming “is so massive.” This huge shift in viewing habits was compared to the emergence of cable TV in the 1980s and 1990s.
“We believe there is vast demand for watching great TV and movies and Netflix only atisfies a small portion of that demand,” the company said.
While it is evident that consumers are slowly but surely moving away from cable TV. However they are also holding on to the streaming services because of the growing number of streaming service subscription options. This year, the total number of streaming subscriptions will touch 536 million and would be close to 600 million by 2020, estimated research firm IHS Markit.
(Adapted from CNN.com)