11/16/2023 0 Comments Big business on netflixNetflix Is More Like A Traditional TV Network Now As I wrote in “ Disney’s Avengers Spell Endgame for Netflix”, Disney’s wildly popular tentpole franchises give it a significant edge in the streaming wars, and its ability to bundle that content with live sports and popular 3 rd party shows is a major competitive advantage. ![]() Disney CEO Bob Iger announced on the company’s recent earnings call that it will offer a bundle of Disney+, ESPN+, and ad-supported Hulu for $12.99/month, the same price as Netflix in the U.S. Disney, NBCUniversal (CMCSA), and Time Warner (T) are all launching their own streaming services in the next two years.ĭisney’s streaming efforts, in particular, represent a significant threat to Netflix. Now, Netflix faces competition from Amazon Prime Video, HBO Now, and Hulu, and the competition is only going to get more intense. To the extent that Netflix has been able to sustain price increases in the past, it was due to the company’s first-mover advantage. As I wrote in my article “ Reality Is Closing in on Netflix”, the company’s price increases are not the result of pricing power, but instead a reaction to its rising content costs. subscriber base decline slightly in the most recent quarter. After its recent price increase, Netflix actually saw its U.S. Streaming services actually face relatively high churn, with 18% of streaming subscribers dropping their service each year. This bull case doesn’t stand up to scrutiny. By this argument, the company is keeping its price low now to attract new customers, but the service is sticky enough that they’ll be able to raise prices in the future. Pricing power has long been one of the major bull cases for the stock. While these high-profile, fashionable deals may get some headlines, we think they will destroy shareholder value over the long-term. Netflix appears to be falling victim to “ The Overvaluation Trap” and feels the need to swing for the fences in order to attempt to justify its inflated valuation. Plus, they’re already signed on to produce a new Star Wars trilogy for Disney (DIS), so it’s unclear how much time they’ll have to devote to Netflix shows in the near future. The screenwriting pair have little goodwill from fans after the final season of Game of Thrones (GOT), and they don’t exactly have a huge track record of hits outside of the HBO adaptation of GOT. Looking at the facts, it’s hard to see how the Benioff and Weiss deal can generate value for Netflix. Speaking to CNBC, New Constructs CEO David Trainer said this deal “reeks of desperation.” Most recently, the company signed up Game of Thrones showrunners David Benioff and D.B. ![]() Netflix’s latest strategy to spend big bucks (and burn more cash) to sign up big name writers and producers to create original content for the platform is risky. Benioff & Weiss Deal Reeks of Desperation
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