Netflix will continue to dominate, BMO strategist says

You bet, says BMO Capital Markets’ Brian Belski, who thinks that the onslaught of competition won’t stack up well against Netflix’s superior content lineup.

The 2010s have surely been the Netflix decade, but competition is heating up in the subscription-based video on demand space with the release of Disney+ and the soon-to-follow HBO Max from AT&T. Those add to others such as Apple TV+ and Amazon’s Prime Video, making for a crowd of services all vying for a piece of your monthly subscription TV budget.

The issue now for Netflix is whether or not the addition of new players will drastically eat into its subscriber numbers or whether customers will be happy to pay more for additional services on top of their already-existing Netflix accounts.

Belski says it’ll be the latter.

“If you talk to the average millennial, Netflix will be the core machine —it will always be the core,” said Belski, chief investment strategist at BMO Capital Markets, to BNN Bloomberg last Friday.

“Sometimes you’ll have Disney+ and a lot of times you’ll keep your parents’ log-in for the cable because you want to watch something on HBO or Crave or Starz or Showtime —in America, it’s maybe Netflix and Hulu and maybe Amazon Prime or Apple Plus but it’s always going to be Netflix,” Belski said. “We think Netflix has some of the best content and has a lot of cash going forward to use for that content.”

Netflix looks to be keeping its lead in the one category that really matters, content, where the company has been increasing its annual budget by about a third every year since 2015. The tally in 2018 was $12 billion and 2019 should come in at $15 billion, according to management’s comments in the company’s latest quarterly earnings.

That huge figure not only beats out the 2019 returns from traditional theatre-going box offices but towers above its subscription service peers. Both Apple and Amazon are in the $6-billion range for 2019, while HBO Max, Hulu and Disney+ are all under $4 billion.

In contrast to Disney, Netflix is relatively bereft of intellectual property that can make for bankable programming but Netflix more than makes up for it through its investment, and Netflix is promising an even better content slate in 2020, potentially putting more distance between it and its rivals.

Last week at the annual UBS Global TMT conference on tech, media and telecom, Netflix chief content officer Ted Sarandos spoke of how his company has increasingly been able to draw top talent in terms of production, direction and acting, in some cases drawing up multi-year contracts with highly-regarded names in the business.

“I believe creators mostly want to be in the culture. They mostly want their work to be seen and recognized and talked about — and Netflix can do that like nobody else,” said Sarandos.

Currently, Netflix is up 24 per cent for 2019 and remains 20 per cent off its all-time high set in June of 2018,