![]() ![]() Netflix’s move to rely on original content has added costs and risks. Additionally, the company’s experience and large-scale infrastructure make it challenging for new entrants to efficiently compete. Netflix’s ability to understand viewer habits and preferences gives it a competitive advantage in the streaming video market.ĭespite increasing content costs, Netflix is well-positioned to invest in high-value content and partner with renowned production studios. The company uses subscriber usage data to understand their preferences beyond simple ratings, enabling targeted content acquisition. Netflix’s cloud database helps with content creation, acquisition, and running its content discovery engine. The platform’s substantial subscriber base and data advantage set it apart from competitors like Amazon Prime. The company tracks customer interactions, analyzes data traffic and performance, and leverages real-time data to iterate quickly. With over 130 million subscribers worldwide, Netflix mines its vast data set to improve content selection and customer experience. Economic Moat RatingĪs the largest subscription video-on-demand provider in the U.S., Netflix has a narrow moat rating and is rapidly expanding globally. Netflix Historical Price/Fair Value Ratiosĭata as of July 21, 2023. Read more about Netflix’s fair value estimate. We expect increased revenue from the crackdown on password sharing will be somewhat offset by increased churn, and that the lower-priced ad-supported tier in the United States will largely take subscribers from the traditional basic plan. We believe these price differentials will cause lower subscriber growth and increase churn. ![]() However, customers will become more price sensitive as the standard plan gets closer to $20, and competitors like Disney+ are already undercutting Netflix’s prices. Our domestic subscriber and pricing forecast generates a 6% average annual revenue growth between 20, as Netflix benefits from price increases every 18 months. Due to the addition of lower-priced ad-supported plans and lower prices in markets like India, we expect the global streaming paid subscriber base to expand to 305 million by 2027 from 230 million in 2022. In general, we are skeptical of the claim that pricing increases won’t harm customer counts globally. Price elasticity plays a major role as well. Our fair value estimate assumes the platform’s domestic paid streaming subscriber count expands only slightly to 78 million by 2027. Management expects further subscriber growth over the remainder of the year from paid sharing as the program rolls out to every country and borrowers in all markets continue to start new accounts. ![]() Customer growth in the quarter was spread across all four regions, with Europe leading the way. Netflix ended the quarter with 238.4 million global paid subscribers, up from 232.5 million last quarter and 220.7 million a year ago. Since management claims the ad revenue per user makes up for the gap between the two plans, Netflix is indifferent to consumer preference. As a result, the cheapest ad-free tier now costs $15.50 per month, making the ad-supported plan more attractive at $7 per month. This relatively low penetration is probably one of the main reasons Netflix canceled its Basic with Ads plan in both the U.S. (90% of the UCAN region), implying that 2% of the base is on the ad-supported tier. ![]() We estimate that the company has around 68 million subscribers in the U.S. While the company disclosed monthly active users of around 5 million globally in May, The Information reported that Netflix has only 1.5 million subscribers on its ad-supported tier in the U.S. However, management remains reluctant to share data on the number of users on the tier. Netflix introduced its ad-supported plan in November 2022, adding another revenue lever and slightly changing its growth outlook. ![]()
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