Tuesday, April 19, 2016

Netflix Slower Growth A Challenge

Like a good multi-level marketing ploy, its hard to grow endlessly before reaching a max.  And while Netflix has exceeded 81 mm worldwide streaming subscribers, each paying a healthy monthly fee, the growth curve is flattening.  That means the challenge to keep growing at double digit rates seems no longer possible.  And it may be harder and harder to find the next new sub especially as prices rise and future customers need more incentive to join.

The future is international, but there are risks too.  Can Netflix find new revenue streams to drive business growth?  Will they need to start cutting some costs to improve profit yields?  Has the market hit some maturity that could lead to upstarts taking some of the Netflix business away? Will Netflix need to keep spending more for original content and better libraries of content to compete against Amazon and others, thus hurting profit margins?  And while current subscribers are very happy with Netflix and thus not dropping the service, can Netflix add incremental value and revenue without hurting the bottom line?

These are the challenges facing the streaming industry and Netflix in particular.  It is hard to keep growing at these previous amazing rates when the market hits saturation.  Add changing interests and other internal and external forces, and the business model is continually challenged.