Competition may be heating up in the streaming content sector but with the head start that Netflix (Netflix Stock Quote, Chart, News Nasdaq:NFLX) has built for itself it will take a long time before any of its Disney, Apple and HBO rivals gets anywhere close.
So says media executive Ben Silverman, who thinks that it’s on the international front that Netflix really shows its strength.
All eyes are glued on Netflix on Wednesday as the streaming giant reports its third quarter earnings after market close.
Billed as Netflix’s last go-round without the added competition from Disney+ and Apple+, both set to debut in the coming weeks, while NBC Universal’s Peacock and WarnerMedia’s HBO Max are slated to come online by next spring.
“Even good results are unlikely to address competitive fear,” said Andy Hargreaves of KeyBanc Capital Markets to CNBC last month. “Weak results/guidance in the third quarter could raise concerns about longer-term growth that would likely be negative for the stock. In-line or slightly better results could drive a modest relief rally, but would not likely address competitive concerns since new services do not launch until the fourth quarter.”
Netflix’s share price has been slumping for much of 2019, a surprising predicament for a stock that saw impressive gains over the last few years as the company’s subscriber base ballooned in a more-or-less competition-free environment. The stock rose from sub-$100.00 territory at the end of 2016 to a high of over $400.00 by June of 2018.
Netflix has the edge over Disney and Apple in international markets…
But Silverman says there’s likely to be plenty of room for the streaming newcomers, with Netflix keeping much of its market share despite the more competitive landscape.
“We’ll see if people are going to zero sum game it and only choose a new one if they get rid of an old one,” says Silverman, in conversation with CNBC on Tuesday. “I think that at Apple and Disney’s pricing, collectively another $10 or $12 dollars per month may not be the straw that breaks the camel’s back.”
“I think it’s just the whole re-introduction of this new bundle and, are you going to have to cut off your old bundle to experience all of these new services or is there going to be a way that the Comcast, Dish and DirecTV players all start serving these up in order to remain in the home as the primary supplier,” Silverman says.
Silverman says that far from having its glory days behind it, Netflix’s growth internationally is still a difference maker.
“I think that they are just so ahead internationally in reaching out and creating subscriber growth and subscribers in general. But the next phase of competition —and this one hasn’t even begun in the US— is going to be internationally where they have a market lead just as they do here, and I think that you’re going to see globally more and more expansion along the lines of what’s happened in the US,” says Silverman.
Netflix shares dropped more than ten per cent after the company delivered its second quarter earnings on July 17, with the company reporting net global subscription additions of 2.7 million, significantly below management’s forecast of five million. Domestically, Netflix lost over 100,000 subscribers over its Q2, compared to the expected gain of more than 300,000.