Netflix Stock and The End of The Streaming Wars (Ticker: NFLX)
Jan 31, 2024
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"Chit Chat Stocks" welcomes Alex Morris from the TSOH Investing Research Service and Francisco Olivera from Arevilo Capital Management. They discuss Netflix's Q4 earnings, their entry into sports entertainment with the WWE deal, the implications of the password-sharing crackdown and new advertising tier, video game goals, and the stock's valuation today. Find their work on Twitter.
Netflix is focusing on scaling its ad business and introducing an ad-supported tier, cracking down on password sharing, and investing in gaming to attract and engage users.
Netflix's deal with WWE enhances its sports entertainment offerings and expands its global reach, targeting a younger audience.
The deal between Netflix and WWE raises questions about the impact of streaming platforms on traditional cable bundles and the potential for sports content to accelerate the decline of cable subscriptions.
Deep dives
Netflix's Shift in Business Model and Content Strategy
Netflix has made significant changes to its business model since 2020. They have focused on scaling their ad business and introducing an ad-supported tier to attract more users and increase revenue. They have also cracked down on password sharing, leading to an increase in subscribers. Additionally, Netflix has made strategic content investments and expanded their competitive advantage over the years. These changes have helped them maintain their global scale and differentiate themselves from competitors.
Netflix's Major Deal with WWE for Streaming Rights
Netflix recently struck a 10-year deal worth over $5 billion with WWE. This agreement gives Netflix streaming rights to WWE programming globally, including shows like Smackdown and WrestleMania. The deal allows Netflix to offer a vast library of WWE content and further enhance their offerings in the sports entertainment space. This move demonstrates Netflix's focus on expanding its content library and attracting a wider audience.
Netflix's Long-Term Bet on Gaming
Netflix has been investing in gaming for over two years, aiming to tap into the growing gaming industry and capture users' attention. While the gaming segment is still in its early stages at Netflix, the company sees gaming as an important part of its long-term strategy. By offering games based on their popular IP and licensing other titles, Netflix aims to retain and engage users. The ultimate goal is to establish a foothold in the gaming industry and potentially stream high-quality games across multiple devices.
Netflix's WWE deal opens up new audience and global reach
Netflix's deal with WWE allows for the streaming platform to reach a younger, tech-savvy audience and expand the global reach of WWE content. By exposing WWE to the biggest streaming platform in the world, Netflix has the opportunity to significantly increase the growth of the sport entertainment industry. WWE management acknowledges that while the deal may not be the best on a dollar basis, the potential to expand the sport and gain huge exposure makes it a smart move.
Streaming platforms' impact on cable bundles and potential future deals
The deal between Netflix and WWE raises questions about the impact of streaming platforms on cable bundles. As traditional cable subscriptions decline, the addition of sports and sports entertainment content, such as WWE, to streaming platforms may accelerate this decline. This poses a challenge for legacy US media companies that rely on sports licensing to retain customers. While it is unlikely that major sports leagues like NFL or NBA will stream playoff games on Netflix in the near future, there is a possibility of NBA games, particularly the in-season tournament, being shown on the streaming platform due to its global nature and potential for impactful and meaningful content.
On this episode of Chit Chat Stocks, we welcome on Alex Morris from the TSOH Investing Research Service and Francisco Olivera from Arevilo Capital Management to discuss:
- Netflix's Q4 earnings
- It's foray into sports entertainment with the WWE deal
- The financial implications of the password-sharing crackdown and the new advertising tier
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