Netflix released their earnings this afternoon and the market didn't seem to like what they heard. Earnings are down and costs are up and despite their plans to raise monthly subscription fees by a dollar, the market may be getting to saturated to expect more increases in growth. Sure there is still growth but when it comes to the stock market, how much you grow matters more. And Netflix might be leveling off.
As competition for content increases, costs to obtain more videos, either through acquisition or original content, will only continue to mount. And given that Netflix has a one stream revenue model limits how much more they can keep producing. Dollar increases a year may be nice but it may not be enough to offset subscription and content costs. The stock market may not find Netflix the darling of streaming anymore until they produce a new revenue stream.
When will advertising come to Netflix? The push to produce is on and that strategic move might be the necessary price. How they add advertising could also affect the subscriber base. Commercial breaks are definitely not the solution; other ad tools are more desirable to keep its base engaged and paying. Done well, ads will immediately boost the stock price,