Netflix (NASDAQ:NFLX) has become a huge part of pop-culture; everyone seems to have it— it even has its own idiom, “Netflix and chill.” And yet, it appears the online streaming service is slowly losing its edge to a rising number of competitors boasting larger content libraries and cheaper subscription fees.
Sound familiar? It should, that’s exactlywhat happened to Blackberry. Remember the utilitarian phones with mini-keyboards that every business person, and eventually ever celebrity, was carrying back in the early days of smartphones? BlackBerry essentially invented the smartphone and for a while, that was enough. The design and secure messaging service were unparalleled.
Enter Apple (NASDAQ:AAPL) and Alphabet (NASDAQ:GOOGL). The rest is history.
Disney to Disrupt Netflix
This week Disney (NYSE:DIS) released more details about thelaunch of its streaming service, and the buzz it received was scary for Netflix stock. The sheer volume of content that Disney+ has to offer is staggering. Not to mention the potential for new series based on popular franchises. It seems inevitable that Disney+ is going to give Netflix a run for its money. Even Netflix CEOReed Hastings thinks so.
As of April 2019, Netflix was serving30% of the global streaming market, putting it firmly at the top of the pack. But as BlackBerry proved a decade ago, the boost you get from being first only lasts so long.
One of the biggest mistakes BlackBerry made back then was resisting change. The security of being the favorite kept the smartphone maker from upgrading to a larger screen, and that reliance on past success ultimately took the firm down. With that in mind, Netflix needs to innovate to keep its seat at the table.
AMC Theaters recentlyannounced its own movie streaming servicethat will allow AMC Stubs members to rent or buy content from a library of around 2,000 films. That’s likely not the last streaming service to rear its head either; everyone with skin in the TV and movie game wants to roll out a streaming package. Independent players like Netflix are losing out on content because the networks themselves (Disney, AT&T’sWarnerMedia) want to keep their own content exclusive.
Netflix invented streaming subscriptions, but the industry it created is starting to shut it out. Netflix is still holding on to itsability to create impressive original content— but even that is a struggle as thecosts to produce quality TV are highand there’s always a chance a show won’t catch on.
The bottom line for Netflix is that while it isn’t BlackBerry right now, their stories are starting to look eerily similar. NFLX will have to be ready for the next big move in streaming and willing to make that shift. With the firm’sQ3 resultscoming up on Wednesday after the bell, investors should be looking for signs that Netflix is prepared for the changing streaming landscape. As competitors’ services have been making headlines just 24 hours before NFLX’s earnings call, you can expect management to comment on how the firm plans to deal with the onslaught of new offerings.
As of this writing, Laura Hoy was long DIS and NFLX
Disclaimer: The above should not be considered trading advice from CCN.
This article was edited byGerelyn Terzo.