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Let’s Netflix and Chill  

  • Netflix (-35.12%) sees its shares hammered as a drop in subscriber growth has investors worried that worse is in store.  
  • Company that came to define the streaming market faces headwinds from competitors, the lifting of pandemic restrictions and may need to pivot again to find new sources of growth. 

It’s easy to forget that not so long ago, Netflix was a mail order video rental service, before it pivoted to digital streaming and content creation.

Netflix arguably created the streaming business, becoming so indispensable during pandemic lockdowns that the firm’s name has become a verb.

But mimicry is the greatest form of flattery and as more content creators and owners rush to cash in on the increasingly saturated streaming market, it was only a matter of time before some of that market share was taken out of the incumbent Netflix.

On Wednesday, Netflix shed over US$46 billion in market value after grim quarterly subscriber figures saw a loss or around 200,000 subscribers, versus a forecast gain of 1 million.

And the outlook is looking particularly bleak for Netflix, as the firm conceded that it was harder to grow subscriber numbers, while it forecasts shedding another 2 million subscribers in the current quarter.

With the world opening up from pandemic restrictions, Netflix, once considered indispensable to cope with the boredom of lockdowns, is now increasingly looking like an unnecessary luxury in the face of rising costs for essentials.

Netflix is currently suffering from the double whammy of slowing content coming to screens because of delayed filming schedules during the pandemic, as well as increased competition from the likes of Disney+, Amazon Prime Video, Hulu and now Paramount Plus.

With more streaming content providers vying for fewer viewers, Netflix will need to rely heavily on its original content to keep its lead and it’s also ventured into video games to diversify its offering.

Whether or not Netflix can engineer a turnaround remains to be seen, but given its track record of having pivoted from a now-defunct industry, to reinventing a new one, it would be premature to write-off the company whose shares will become increasingly more attractive as they fall. 

 

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