[Brief]To The Downfall of Netflix?

Netflix, the indisputable leader in online streaming may no longer be that indisputable. Since its creation in 1997, and the introduction of its online streaming service in 2007, the streaming service has faced little to no competition. The service proposed an incredible library of original contents and blockbusters that inevitably changed how we watch TV. The arrival of the likes of Amazon Prime Video and Hulu did not make the giant shivered, but that may soon change with the arrival of competitors from Disney, AT&T, NBCUniversal, and Apple. Let’s see why this is dangerous for Netflix.

In the US, half of those aged between 22 to 45 watched zero hours of cable TV, and about 35 million households have quit cable in the past decade reports Forbes. This phenomenon is referred to as “cord-cutting”, and Netflix is very responsible for that. Disney which is one of the world’s largest media companies makes one-third of its revenue through cable business.  Hence Netflix inciting its customers to ditch cable TV for online streaming has negatively impacted its revenues. But Disney will soon be launching its counter-offensive as in 175 days, Disney+ will be released.

Netflix Will Be Emptied

Disney+ will be Disney’s proprietary online streaming service and will charge $6.99 a month. Disney+ will, by the end of the year be joined by AT&T’s streaming platform. What does that mean? Both companies have guaranteed to pull their content from Netflix and will propose them on their own platforms. Keep in mind that AT&T exploits Warner Media which consists of HBO Movies, New Line Cinema, Warner Bros, DC Entertainment and Turner Broadcasting as subsidiaries. On the other hand, Disney owns Marvel, Pixar Animations, Star Wars, ESPN, National Geographic, ABC and Fox just to name these - a well-furnished catalog, therefore.

In numbers, this represents 8% to 12% fewer viewers which Disney brought to Netflix from 2017 to 2018. In addition, minus 1.7% of viewers following the withdrawal of all Marvel Entertainment contents according to Variety. As for Warner Media and NBCUniversal, both accounts for 72% of the total time spent of the famous platform. This is, without a doubt, an incredible number that gives an idea of how much harm this will give Netflix following the expiration of the operating contract with said entities.

Netflix + Originals = Not Original

Netflix had seen this coming and had acted accordingly. In 2018, the company released 88% more original content than the previous year, which cost the company a wholesome $12 billion. To achieve this, they borrow nimiety sums of debt. Currently, the company owes $10.4 billion - 59% more than last year - reports Forbes. However, this remains far from enough as Netflix’s original contents account only for 37% of US streams in October 2018. The 63% remaining comes from licensed content.

For example, the iconic sitcom “Friends” which Netflix acquire for the nice sum of $100 million will, by the year 2020, be no more available on the platform when the deal with WarnerMedia will be expired. Bear in mind that Friends had rapidly escalated to become one of Netflix’s best.

And The Winner Is…

The biggest winner in this race is probably (or undoubtedly) Disney. Not only does it own Hulu (the second-fastest-growing streaming service), but it has, over the past six years produced the world’s top-selling movies, earning $1.2 billion in the box office with its average film - the last in date being Avengers: Endgame and Black Panther. It is even reported premieres will also be available on Disney+. A winning formula.

The five biggest cable companies in the US are worth $760 billion. Cord-cutting has lead to Netflix claiming the profit left behind as it’s stock value has been over 8% since 2009. This juicy opportunity, therefore, did not only attract Netflix. In sum, Netflix will have to gear up if they want to stay profitable when the wave of the competition will hit the market. Producing original content has proven not enough for the company - criticized especially for being made for millennials and therefore not everyone. Some proposed Netflix should consider partnering (merging) with other companies to bring more original and diverse contents to the table. That makes sense but left to see if the will do that.

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I am not a huge Netflix consumer. I don’t watch much of Netflix’s original shows (The Chilling Adventures of Sabrina being the only one actually). Indeed most shows/movies in my watchlist are licensed products. Hence Disney+ seems way more attractive, and will inevitably put my hands on it when the time comes (at the detriment of Netflix, probably). However though this increase in streaming service offers announces the good news to consumers on the surface, they bring a huge constraint which is price. Each service will offer very different content all very interesting, and If one wants that variety they will have to pay the price. Not everyone can afford that, henceforth this will invariably lead to one service imposing itself over the others. Disney+ which is $6 less than Netflix maybe? Or we’ll see a “remontada” from Netflix? Time we’ll tell.