Lucas Shaw, a Bloomberg reporter specializing in media and entertainment, joins to unpack Netflix's latest earnings report, revealing impressive subscriber growth but looming concerns about competition and advertising. They discuss Netflix's five pressure points, including the evolving strategies to counter competitors and the risk of overvaluation. The conversation also touches on Disney's delayed succession planning and how it could impact the industry landscape. Finally, predictions about viewership for the upcoming World Series offer an exciting sports angle.
Netflix continues to thrive with substantial international growth and a remarkable increase in subscribers, challenging doubts about its future sustainability.
The delayed CEO succession at Disney reflects internal uncertainties and highlights the competitive pressures facing major players in the streaming industry.
Deep dives
Netflix's Continued Growth and Market Position
Netflix has reported significant growth with nearly 283 million paid subscribers and robust earnings, beating projections across the board. The company's revenue reached almost $10 billion, and its stock price has increased over 60% this year, solidifying a market cap exceeding $300 billion. Despite concerns about slower growth due to the impact of password sharing crackdowns, Netflix continues to thrive, particularly in international markets like Europe and Asia. Still, analysts question whether Netflix's growth trajectory can sustain at this pace given the increased competition and potential pressures on future subscriber additions.
Advertising Strategy Challenges
Netflix faces challenges in scaling its advertising business, still trailing behind Amazon and traditional studios. Recently reported figures indicate a 35% quarter-over-quarter growth in ad tier memberships, but Netflix's advertising revenue isn't expected to become significant until at least 2026. The competitive landscape, particularly with Amazon's aggressive ad strategies, may hinder Netflix's revenue potential in this area. Despite having a substantial number of active users, Netflix needs to enhance its advertising infrastructure to maximize profitability and market share.
Disney's Succession Dilemmas
Disney's board has delayed the decision regarding its succession plan until early 2026, suggesting a need for additional time to find the right successor for the role of CEO. The extended timeline raises questions about the internal candidates and whether the board is considering external options as well. This delay indicates uncertainty within the company about its leadership and future direction as they face intense competitive pressures. Industry speculation remains focused on whether Bob Iger will retain influence in the company after stepping down, with opinions divided on his potential future role.
Concerns Over Competing Content Bundles
In discussing the content bundling trends among competitors, Netflix positions itself as the leader due to its vast content library and engaged subscriber base. Netflix executives highlight that many competitors bundle their offerings out of necessity, as they struggle with limited engagement and content depth. Despite Ted Sarandos's confidence in Netflix's sustainability, the pressure from competitors' bundles poses a potential threat to Netflix's market dominance. The company emphasizes its unique offerings but must remain vigilant against the evolving strategies of its rivals to maintain its leading position.
Matt is joined by Bloomberg’s Lucas Shaw to first talk about Disney’s report that it would name a new chief executive in “early 2026.” Then they offer their takeaways from Netflix’s latest earning report by looking at the streamer’s five pressure points: advertising, the threat of bundling, theaters, compensation, and growth (02:46). Matt finishes the show with a prediction about World Series ratings (29:06).
For a 20 percent discount on Matt’s Hollywood insider newsletter, ‘What I’m Hearing ...,’ click here.