"It seems that no streaming service can completely tie the hearts of consumers!" After years of rapid growth, Netflix's new competitors have given consumers more choices, leaving investors wondering if there will be a big winner!
Netflix's second consecutive devastating quarterly forecast hit the stock hard this week, wiping out $50 billion in market capitalization in just one day. And that also makes Wall Street wonder if streaming services are a good investment overall! What about Ai Youteng, who faces across the sea?
Closely following Netflix's huge growth, streaming services have boomed in recent years. Netflix was essentially the inventor of the streaming service, and only Amazon followed first. But now, new competitors from traditional media companies and other giants have emerged, including Walt Disney Inc. and Apple, Warner Bros. and Conscat, among others, and even China's iQiyi, Tencent, Youku, Mango, among others.
Wall Street is excited about the possibility of new revenue streams from large and small companies, especially after the COVID-19 pandemic has led to huge gains for users from consumers forced to take refuge in place and hungry for entertainment options. However, after Netflix's recent setbacks and its remarkable disappointment, the streets began to become less certain after less than a year from Quibi Inc to Warner Bros. Discovery Channel's cancellation of CNN+ in less than a month.
Jessica Reif Ehrlich, a global research analyst at Bank of America, said in a note on Wednesday: "We believe investors are now questioning the long-term market potential of streaming."
Lightshed Partners' Rich Greenfield also spoke on subscription video-on-demand (SVOD) in a report on Thursday: "With potential markets of 500 million to 1 billion years of global user problems, and tech giants (Apple and Amazon) not caring about competition for short-term profits from SVOD, and the need to constantly retain user must-see programming, it is becoming increasingly clear that SVOD's profitability may not be as tempting as investors hope, It's certainly not as lucrative as streaming media replacing traditional businesses. ”
The most prominent example of the heightened mistrust of Netflix is the streaming pioneer who has won fans through years of crazy growth, but its market value has fallen from more than $300 billion at the peak of the pandemic to less than $100 billion on several occasions this week. The company avoided an ad-backed model and lost millions of shared accounts as it grew. But in recent months, economic, social and geopolitical factors have combined to weaken its dominance, leading executives to announce major changes.
Alam Sinrick, a professor of media at American University, said: "It's a saturation (people watching more streaming content on multiple services) and fragmentation (Netflix producers are stripping and creating their own content)."
Paul Erickson, director of entertainment research at Parks Associates, said: "The challenges of the streaming market are both for Netflix and for the industry as a whole. As a result of the war in Ukraine, Netflix shut down its operations in Russia, resulting in the loss of 700,000 users in Russia, highlighting its position as the largest and most mature service provider overseas.
More generally, slower subscription fee growth is plaguing the industry. Because consumers have cut costs in response to inflation, and the post-pandemic rebound has weakened. Netflix, Disney and other companies have benefited from a surge in users watching streaming at home, but the trend has waned, he said. Consumers are more discretionary in terms of spending, which will benefit Disney because Disney's bundling is more able to hedge against risk. "
Last December, Forrester found that 43 percent of U.S. adults using streaming services "care about how much they pay for all the streaming services they subscribe to." Nearly half (44 percent) of respondents are open to cheaper, ad-driven streaming services.
"What caught up (Netflix)?" You can't keep growing forever, inflation has risen," said Samuel Craig, professor emeritus of marketing at NYU's Stern School of Business. "Consumers are reassessing their spending on entertainment, gas and groceries. If you subscribe to 5 to 6 streaming services, it's easy to give up 1 or 2 streaming services. Once something goes wrong, investors quickly exit. ”
Mark Wiener, principal analyst at Smart Tech Research, said consumers are voting for ad-supported services with their clicks and fingers, and they have a huge amount of content to choose from. He added that Netflix must also compete with professional content from Disney (which is more family-oriented), Apple (which focuses on prestige projects) and FuboTV Inc. (sports) while maintaining a "everything for all" strategy.
Veena said: "Netflix's price increase has not helped. It spends so much money on content ($17 billion this year) that it could usher in the 'moment of Jesus' coming. ”
In January, Netflix raised prices in the U.S. and Canada, the third in the past three years, while continuing to invest heavily in content. As a result, Netflix's services can seem expensive compared to new competitors willing to attract users at lower prices.
Forrester analyst Mike Prox said: "Nowadays, consumers have more choices when it comes to watching high-quality programming on streaming platforms, but their time and money are also limited. Ultimately, consumers choose which streaming services to watch based on the content and the overall value they get. ”
Morgan Stanley analyst Benjamin Swinburne cites the "squeeze-out" model of U.S. households: They subscribe to an average of 2.8 paid services, up from 2.5 a year ago. The average subscription volume of Netflix users increased to 4.1, while the average subscription volume of Disney+ and HBO Max users both exceeded 5.
Swinburn said in a report on Thursday: "In other words, no streaming service seems to be able to monopolize consumers."
Consumer reactions may be to constantly cycle through streaming services, signing up for a short period of time to enjoy new content before canceling and joining a new service for the same purpose. The practice is known in the industry as "churn," and according to Deloitte, 25 percent of U.S. customers have adopted the "churn and come back" philosophy, which is to cancel the streaming service and come back within a year to resubscribe.
As the price of a service increases or a popular show ends, the churn rate will only increase. According to Deloitte, the average IMM of all paid streaming VDS in the U.S. remains 37%, while the immediacy rate of millennials climbs to 50%.
Deloitte Vice Chairman Kevin Westcott said: "We have launched an arms race for original content, with subscribers racing. The shift we need is more content, as well as content discovery, music and games. ”
Independent streaming analyst Dan Wreborn believes that while the future of streaming remains questionable, Netflix's situation is not as bad as Wall Street's reaction suggests. "Netflix's revenue is up 10 percent and the data has improved [in the Asia-Pacific], but Wall Street is doing nothing about its subscription business," Ray bern said. Netflix should stop reporting this data, just as Apple stopped reporting iPhone shipments. ”
The independent analyst believes that Netflix has solved these problems by expanding into the gaming field, accepting advertising and cracking down on shared accounts. Netflix executives estimated Wednesday that shared accounts allow 100 million families to watch their content for free. Rayburn noted that the company can generate $3 billion in revenue a year by converting 25 percent of 100 million unpaid households into users at $10 a month.
This article originated from the financial world