This morning, we are going to talk regarding the media. I suggest you understand why the pioneer of the streaming sector, Netflix, just stumbled heavily in the stock market this week. In response to the publication of poor results and poor forecasts, Netflix has indeed lost more than 35% of its stock market value. In practice, the streaming pioneer explained that he had lost 200,000 subscribers during this first quarter of 2022 alone. While in the outlook that the company had communicated to stock exchange circles, it hoped to gain 2.5 million new subscribers. So it had the effect of a cold shower. Worse, according to Netflix, the loss of subscribers should even continue in the near future.
Yet Netflix was the big winner of the pandemic. Subscriptions had increased sharply because of the hundreds of millions of people confined due to covid-19. Netflix hoped that this increase would continue, but the opposite happened. However, this fall is not a surprise. First, even before the drop on Wednesday, Netflix stock was already showing a sharp decline since its last peak reached on November 17, 2021. Then, because other players in video streaming are also affected by this fuck.
Many investors are therefore wondering regarding the post-covid sustainability of the video streaming industry.. And, these questions, we can understand them post-covid because the streaming market seems really saturated. There are more and more players, including Disney, Warner Bros Discovery, and so more and more competition.
In this context, winning new market shares will be very costly for everyone. Moreover, everyone was able to see the current high inflation. And the effects of this are beginning to be seen, with less frequentation in stores and restaurants. Clearly, a non-negligible part of consumers, in Belgium and elsewhere, have started to arbitrate between their expenses. And it seems that the Netflix subscription sometimes falls by the wayside. Add to that the notorious piracy that Netflix is failing to curb and the industry is unlikely to rebound.
I am not quoting Amazon or Apple which are also streaming companies because these are not “pure players”. These two groups are very diversified in sectors other than streaming. And yet, Amazon is still paying for this bearish momentum, with Apple remaining stable.
The sector should consolidate in the coming years.