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Heavy is the head he carries The Crown.
Once it hit the TV industry, Netflix has become the king of broadcasting with 208 million subscribers, nearly half of the world’s total, excluding China.
But the latest round of quarterly results from media companies, which concluded Thursday night with figures from Disney, has shown that the disruptor now has a firm role as a starting defender.
Three of the old media groups that Netflix tried to dethrone (Disney, HBO and ViacomCBS) grew transmission services more quickly in the first three months of this year, fueling investor fears that Netflix will have to continue pouring billions into new shows to attract viewers or risk losing momentum.
“Netflix is not only in the game, it invented it. But thriving is different in intensity, so the rest of this year is crucial, ”said Sophie Lund-Yates, a Hargreaves Lansdown equity analyst. “The performance of the pandemic was impressive, but anyone can make hay while the sun shines.”
“We can’t detect any real change”
Netflix added fewer than 4 million subscribers worldwide during the first three months of the year, severely losing its own forecast. Only 450,000 people signed up in the United States and Canada, its largest market.
Reed Hastings, co-founder of Netflix, avoided the threat of rivals after reporting these figures last month and told investors, “There is no real change we can detect in the competitive environment.”
But Disney Plus attracted 9 million subscribers in the quarter and ViacomCBS added 6 million, while HBO registered about 3 million subscribers in the United States on its Max broadcast service.
In the last year and a half, Disney, Apple, WarnerMedia, Comcast and others have launched new streaming platforms. There are now more than 100 streaming services to choose from, according to data company Ampere, with a staggering number of niche products like Shudder, dedicated to horror, or Horse & Country, which broadcasts horse racing.
10%
Netflix share price drop, so far
Unlike cable TV, which often included customers in sticky pay-per-view packages, Netflix subscriptions can be canceled with a few keystrokes, making it easy for users to switch services based on what they want to see.
Shares of Netflix have lost 10% this year and have lost a wider rally on the stock market.
Part of this is explained as a pause after a sharp rise in its shares in recent years, when the company reached new levels of subscribers and investors were willing to pay ever-higher prices for part of its future growth.
But there are also signs that Netflix, founded in 1997, is moving to a more mature stage.
“A different phase of growth”
The company in January said it no longer needed to raise debt to cover the cost of its programming, a milestone after a decade of relying on junk debt to spend Hollywood studies. Netflix last month announced a $ 5 billion share repurchase plan.
While Netflix acts as a headline, raises prices, and drags more money into customers, Walt Disney’s centennial company and its partners resemble emerging companies, prioritizing growth as they lose billions of years in transmission efforts.
Disney’s direct-to-consumer business unit (which includes Disney Plus, Hulu and ESPN) posted an operating loss of $ 290 million on $ 4 billion in revenue during the quarter. Disney expects to lose money from its broadcast business by fiscal year 2023.
“Netflix is in a different growth phase than other streamers,” said Paolo Pescatore, an analyst at PP Foresight. “It will be many years before many other transmission services make a profit. They all make huge bets and will be loss leaders for years. “
“We’re spending a lot of money”
The strategy has been good for Disney: its shares have risen more than 60% in the last year, as investors focused on the number of streaming subscribers it added, instead of the billions dollars he lost to the pandemic. The fact that the number of subscribers in the first quarter was shy of the forecasts of 5 million caused their shares to fall on Thursday in trading after hours.
According to Ampere, there are now more video streaming subscriptions than people in America, with 340 million subscribers in a population of 330 million, opening the question of how many services households will continue to pay for.
Executives agree that visits are ultimately the engine of the underwriting business. And, as Hollywood knows, they are hard to predict.
Disney executive director Bob Chapek pointed to Marvel’s recent programming as a catalyst for its recent subscriber momentum. “We are spending a lot of money. . . in order to create content that makes consumers come back, ”he said Thursday.
Netflix executives have promised that growth will warm during the second half of 2021, with the return of shows such as The Wizard. “There are a lot of things that are based on the enhanced content schedule that is expected later this year,” Lund-Yates told Hargreaves Lansdown. “Or the focus will be on [Netflix] for many wrong reasons. “
Additional reports by Alex Barker
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