Drama continues as Netflix lose two million subscribers

We use your sign-up to provide content in ways you’ve consented to and to improve our understanding of you. This may include adverts from us and 3rd parties based on our understanding. You can unsubscribe at any time. More info

So when quarterly results came out last week, the market breathed a sigh of relief. Subscriber losses weren’t as bad as expected. But there’s a limit to the excitement.

Nearly one million accounts still rolled the credits on their subscription. That shows how tough things are for the world’s biggest streamer.

It’s hard to squeeze more revenue out of the group’s biggest markets. Pretty much everyone who will ever get a Netflix subscription in the US and Canada already has one.

That puts the pressure on emerging economies. This is a great growth opportunity – in fact, India was the reason behind the subscriber beat last quarter.

But these regions generate much less revenue, and moving them up the scale when it comes to Average Revenue per User will take a lot of time and money.

Netflix cannot afford for customers in developed countries to switch off completely.

The group spent upwards of $17billion on content last year. That’s likely to continue rising with no back-catalogue of hits to fall back on, unlike Disney+ or  Amazon’s new MGM Studios content. Netflix spends big just to keep hold of the customers it already has.

Gaming is a potential growth avenue, but it’s difficult to quantify this as much more than a pipe dream. Without a firm plan in place, it doesn’t add much to the investment case yet.

Another growth lever comes from the millions of people watching Netflix for free. Account sharing is nothing new, but Netflix is cracking down. Introducing an ad-tiered system is also the right move. Today’s cash-strapped consumer may appreciate having a cheaper version.

Netflix has a lot of debt. That’s something to watch, given the rising interest rate environment.

Netflix is a trailblazer and as the world turns to streaming, there is potential ahead. But for now, more proof is needed that it has the right idea about how to sustain growth.

Source: Read Full Article