Four Reasons Why NetFlix Won’t Be Picking Up Speed Anytime Soon
Netflix might be the most popular video-streaming service in the world at the moment, but its influence on the market is quickly diminishing.Credit
Despite the release of several new and exciting shows, and the ever-growing user base, Netflix’s stock plummeted by about 16% on Wednesday. The company published its results, which actually showed growth, but not to the extent that experts predicted. It might just be a worrying indicator of things to come or it might just be a blip on the radar, but here are 4 reasons that explain why Netflix’s numbers aren’t that impressive:
1. Ever-increasing competition
With the emergence of Amazon’s SVOD services and Time Warner Cable’s HBO Go, both Hulu and Netflix are getting some tough competition. Hulu is already taking a large chunk of Netflix’s market share and Amazon’s services, along with HBO Go are already stealing away potential customers. It’s clear that Netflix is no longer the industry leader it once was.
Netflix has some amazing shows on offer, including one of the best political dramas in recent years, House of Cards, as well as originals like Daredevil, Jessica Jones, Bloodline, Stranger Things, Narcos and a plethora of other shows that they’ve just added these past few months.
2. Increased costs
Since we’re talking about original television shows and series, we should mention the rising costs of content production. The emergence of new competition has also seen Netflix’s production costs increased. Netflix already increased its content production to $5 billion, but its venture into the international markets will additionally increase production costs.
American TV shows and series are already popular on the international stage, but in order to truly dominate the foreign markets, Netflix needs to expand its content with new and exciting shows that span multiple locations and nationalities, which is way more expensive than just shooting at home.Credit
One such series is Lilly Wachowski’s Sense8 whose production budget was north of $100 million, which is the equivalent of a big-budget Hollywood action film. Not too shabby.
3. International markets aren’t budging
Netflix recently expanded to 130 countries worldwide, but the prognosis for their international market revenue is bleak to say the least. If the company is to get a grip on the international market it will have to win over audiences abroad with new and diverse shows.
They are already on the right track, even if the numbers don’t quite support that.
4. DVD sales are declining
Netflix’s domestic DVD business has 4.8 million subscribers, but Neil Macker, an analyst at Morningstar Research, predicts that the service will lose 0.7 million subscribers a year, from 2016 all the way through 2020. That would mean that by 2020, Netflix will not have more than 1.5 million paid subscribers.
While it’s true that the company wants to dedicate itself to Subscriber Video on Demand services, its DVD business makes up 48% of the company’s total revenue and investors might not be too happy about the rapid decline in subscribers.