Everyone loves to watch Netflix, the world’s most popular streaming service. Sales in the last quarter increased by almost a fifth compared to the previous year and net profit nearly doubled. Still, there is gloom about the company’s financial prospects. Rivals Disney and Amazon are building impressive libraries of television and movie content. Netflix should consider buying its own studio.
This year’s subscription growth could never match the lockdown-induced increase in 2020. Netflix added 1.5 million net new subscribers in the second quarter. Although it was above its own low forecast, it failed to attract anything like the 10 million in the same quarter last year. Pessimists complain about the loss of nearly half a million subscribers in North America and Canada – the first drop in two years.
Netflix needs a growing number of customers in the richest countries in the world who can absorb price increases and turn a profit. Over the past two years, average revenue per member in the US and Canada has increased by $2 to $14.54. In Latin America that is half.
The subscription delay isn’t just about difficult comparisons. Nielsen songs released in June show that streaming services now take up more viewer time than broadcast TV. Netflix has a content problem. It lacks new blockbuster, original hits. Analytics start-up Parrot Analytics’ subjective measurement of “demand interest,” including Google searches and social media, reveals that rivals like Disney have swept interest in Netflix.
Netflix spent $8 billion on content in the first half of the year. New hits may appear in the second half. It also has a Disney-esque plan to monetize intellectual property through an e-commerce store and video games. But the competition is fierce. Amazon, Apple, Google and Facebook are also pumping money into games.
Why not buy a studio? Disney bought 20th Century Fox and Amazon bought MGM. Independent film studio Lionsgate, with a net worth of $3.4 billion, has franchises such as: Twilight together with the small streaming service Starz. Netflix should consider buying more content through a Hollywood studio before picking them all up.
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