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  • Writer's pictureMagdalena Gołębiewska

Netflix became profitable but will lose with Disney (or not?)

Lately Netflix announced that they became profitable. Congratulation :) On the one hand - since: 1/ they already predicted loss or the next 2 quarters

2/ to have 1 profitable Q it took them 13 years and 96 million paid subscriptions. Ufff.

However, Netflix knows that "Content is the king" and that is why they invested so heavily in their own productions. That strategy definitely paid off. Let's look at Netflix’s stock price. It has rocketed 8,300% since 2009, leaving even Amazon in the dust:

So - is Netflix the future of TV or not?

Let's start from the obvious: Netflix changed how we watch TV, but it didn’t really change what we watch…

We watch the same series, movies, programs, just not in TV, but online.

What Netflix is trying to do now, is to produce as many movies as possible. But.. in this space the competition is really strong.

Let's come back to the money. Netflix wasn't profitable mostly because they were spending on production s much. Last year, the company spent $12 billion developing original shows . It released 88% more original programming in 2018 than in 2017.

Additionally spending on original shows and movies is expected to hit $15 billion this year.

Netflix now invests more in content than any other American TV network.

To fund its new shows, Netflix is borrowing huge sums of debt. It currently owes creditors $10.4 billion, which is 59% more than it owed this time last year.

So, if TV's are not investing s heavily, who is the rival? Well..... old, good Disney!

Disney’s cable business has stagnated over the past seven years. But in about 175 days, Disney is set to launch its own streaming service called Disney+.

The price seems reasonable - it’s going to charge $6.99/month which can be slightly cheaper than Netflix. And.... it’s pulling all its content off of Netflix.

This is a big deal. I could say - that can be the beginning of hard times for Netflix. Why?

In six of the past seven years, Disney has produced the world’s top-selling movie.

Top five highest-earning movies of 2018:

  • Avengers Infinity War

  • Black Panther

  • Jurassic World: Fallen Kingdom

  • Incredibles 2

  • Bohemian Rhapsody

4 out of 5 (except Jurassic World) are Disney productions. We have to admit - Disney is the king. Over the past six years, its average film has raked in $1.2 billion at the box office.

That is not everything, it gets worse for Netflix... Disney owns 60% of America’s second-largest and fastest-growing streaming service, Hulu.

Not mention about rights to StarWars which gives it something no money can buy. And since they own most successful children movies, most of the parents will switch to Disney (you can't say no to your children).

Interesting battle is n a horizon. However, as a fan of Netflix and loyal customer, I still believe that they will find their niche, which can be connected with the best series production.

The future will show.

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