Here's How Netflix Can Bounce BackNFLX) shared that the company will spend all of its $6 billion assigned for content this year, and also shared that this number would rise next year. The rising cost will have temporary effects on the company, but stockholders should not forget that content is that base on which the company is built and making it stronger will benefit Netflix in the long-run. The company can only endure if it has adequate content to withstand itself as the industry comprises of many rivals which are struggling hard to gain lead.
Furthermore, it is mandatory for Netflix to spend money on content to safeguard its future, as subscriber growth accounts for the thing that pushes the company’s revenue.
On the other hand, overseas streaming subscribers are surging faster as compared to United States streaming subscribers, and it is highly likely that it could gain a lead in a few years. When it comes to DVD subscribers, U.S. DVD subscribers are falling linearly.
Considering the present situation, the company has 36.05 million international subscribers compared to 47.13 million U.S. streaming subscribers. However, TV cable subscribers in the first quarter were 49.1 million and are gradually declining. Therefore, it can be said that the company’s U.S. streaming subscribers would momentarily surpass U.S. cable subscribers.
As a result, it seems that there is still plenty of room left for the company to grow further in the U.S. on the condition that U.S. broadband subscribers escalate quicker than the company’s U.S. streaming subscribers. But it can be certainly said that the international market will propel Netflix’s growth in the long term.
Apart from this, SCMP reported that Netflix is planning to make a deal with Leeco regarding content cooperation. Considering that rising competition in the Unites States is coercing domestic subscriber growth, a disruptive tactic to subscriber acquisition may be essential for the company to gain back subscriber growth as well as stockholder confidence. A positive domestic growth trend can have a great positive effect on the stock, which is currently being held up by strong international growth.
Netflix pulled back considerably after reporting disappointing quarterly numbers, however the stock has regained a huge portion of those losses. This uptrend will likely continue in the coming weeks. Moreover, due to the reasons mentioned above, I believe Netflix will continue witnessing strong international growth going forward.
Published on Aug 3, 2016By Yaggyaseni Mittra