Netflix is dealing with increased competition and the loss of some of its licensed content.
It’s a tough time to be in the streaming business, especially if you’re Netflix. The company has been under fire for the past six months, ever since Disney and Apple announced they were launching streaming services.
This week, Disney+ launched amidst major fanfare from Wall Street, though not without some technical difficulties. And many people are wondering how Netflix will deal with this competition in the coming months.
Significant headwinds lie ahead for Netflix
Netflix certainly isn’t without its challenges. One of the biggest challenges the company faces is its reliance on pricing. Periodically, the company needs to raise its prices to continue to appease investors and grow its revenue. But this is a delicate balance because if it raises prices too high, many of its customers could jump ship.
Netflix did raise its prices earlier this year in the U.S. and internationally, and it experienced minimal customer churn. But it’s unclear how long the company will be able to continue raising its prices without losing customers.
Another challenge Netflix will need to deal with is that it continues to lose its most popular shows. Some of the company’s most popular shows are not content created by Netflix. Instead, they are licensed content that Netflix was permitted to broadcast.
But now, many of the networks that created these shows are launching streaming services of their own. So Netflix continues to lose some of its most popular content, like The Office and Friends. In all, Vox reported that Netflix could lose up to one-fifth of its content.
And this is where Disney has a substantial advantage over Netflix. Disney doesn’t have to rely on licensed content because it has a huge archive of movies. And Disney plans to have a library of over 7,500 television shows.
What is Wall Street saying about the streaming wars?
One advantage Netflix does have is that it has already been in the streaming market for over 20 years. This gives the company a dominant position over companies like Apple and Disney.
And overall, Wall Street seems to be optimistic about the company’s prospects. For instance, a Raymond James analyst said he believes that the streaming wars are overblown and that analysts will get more comfortable with the increased competition.
Netflix is considered a moderate buy, and the average price target is $373.69. This price target gives the company a potential upside of more than 28%.