Netflix was a pioneer. It ultimately killed BlockBuster video. Its been rewarded for its foresight as the stock has soared 8,500%+ in the last decade as adoption of streaming video took off.
Netflix leased shows and movies that other companies produced, for its streaming platform. The biggest and most powerful media companies on earth helped Netflix build its business. That’s coming to an end over the new few years.
Netflix’s content creators like Disney and NBC have realized that they could do the same thing Netflix is doing and make even more money by cutting out the “Netflix middle man” and stream their content directly to consumers for a small monthly fee.
Disney is launching Disney+ later this year. It will without doubt be the new home of the world’s most popular movies. If you think you’re going to get Disney’s newest movies, think again. Disney isn’t going to cannibalize its own movie sales by offering the latest Avenger’s movie on its streaming service for $6.99 a month when the movie is released in theaters. Instead, it will take many months before the latest Disney movie hits Disney+. It remains to be seen if Disney+ subscribers will feel cheated by not getting the latest Disney movies. The more important point though is that Disney content will no longer be on Netflix.
It’s not just Disney jumping the Netflix ship.
AT&T bought WarnerMedia in 2018. One of the most popular shows on Netflix is Friends which is owned by AT&T. AT&T is launching its own streaming service in 2020. Friends will be pulled off Netflix for good in 2020.
The most watched show on Netflix is The Office. NBC Universal owns The Office. NBC Universal is launching its own streaming service and pulling The Office off Netflix by the end of next year.
It is estimated that half of the 50 most popular shows on Netflix will be pulled from Netflix in the next couple of years as more companies plan to launch their own streaming services.
Investors are starting to realize that Netflix doesn’t have a very big mote around its core business.
Netflix is frantically trying to build a mote around its business by producing its own content. It spent $12 billion last year producing content, and it expects to spend another $15 billion this year. To build this mote, Netflix is taking huge amounts of investors money to produce content. Over the past year its debt has shot up 58% to $10.3 billion. Netflix earned $1.2 billion in profits last year. At this pace, Disney+, NBC, and AT&T could drive Netflix into bankruptcy by 2023. Can Netflix really produce better content than Disney? Most people don’t think so. Disney’s purchase of Marvel and then Star Wars pretty much guarantees Disney as the content creation winner for the next decade.
Disclosure: I do not hold any position in NFLX stock.