Monday, July 18, 2016

The Future Success Of Netflix

Nothing lasts forever.  Even Netflix knows that; they watched their DVD business erode while working to navigate the streaming world.  It was a bumpy ride along the way but the result so far has been quite impressive.  But growth appears to be declining, according to the Wall Street Journal, and international challenges and content costs aren't helping. 

In August, the remainder of the U.S. subscriber base will see its monthly fee rise to $9.99; for my household that is $2 more a month or a 25% increase.  Yet that is not enough to satisfy investors in the business seeking more future growth from the streaming giant against greater competition from Amazon and Hulu.  So what is Netflix to do as its Act 3?

Of the options to consider, Netflix might want to build out a streaming tier of live content, at an incremental cost, as a skinny bundle to drive more cord cutting. They could add more advertising to the mix, either with an ad supported option or with more sponsored content to the stream.  Netflix might consider growing through expansion; perhaps the purchase of a studio like Paramount or some cable networks.  For Netflix, standing still is not an option.  They learned that lesson from their DVD rental business.  Existing growth of its subscriber base will dry up and future revenue growth must come from other business platforms.