Netflix has posted its third-quarter results, and they didn’t look so good.
Just two percent of the people who signed up for the streaming service were from its largest market, US and Canada.
Only 70,000 new subscribers came from this region.
This is big news, and it’s overlooked by most investors.
Here’s what it means…
Netflix Is Facing an Uphill Battle
The Covid pandemic has been great for Netflix. In 2020, it added about 36 million new subscribers. With few places to go, people were stuck at home. It makes sense that they started binging on TV shows and movies as a means to escape the crisis that the world was facing.
Now that the world is reopening, Netflix is in a difficult space. Not only are people returning to traveling and going out… new competition is chipping away at the company’s business.
Disney and Apple, backed with essentially unlimited budgets, are trying to lure Netflix’s subscribers. And they are successful.
A research firm Digital TV Research says that by 2026 Disney+ could have more subscribers than Netflix.
So far this year, Netflix has added just 88,000 subscribers in the US and Canada. That’s down from six million in 2020.
In other words, investors should stop treating Netflix as a high-growth company.
Right now, it could still be adding users in areas such as Asia-Pacific, but the core US and Canada market is stalling.
Investors should take notice.
And pay attention to the next big thing in streaming…
This Market Is the Next Step for Streaming
This market is the next big thing in streaming.
It’s called live streaming.
From gaming to explainer videos, people prefer live streams over most other types of content.
And two-thirds of people aged 18–34 watch live streams regularly.
This market is growing fast. By 2027, it could be worth $247 billion, according to some research providers.
By 2024, it could hit almost one billion users worldwide. That’s 26% higher than it is today.
Online gaming and live streaming go hand in hand. People spend billions of hours watching players accomplish in-game missions or compete against one another.
The companies that enable them to do so build platforms for gaming and streaming.
Twitch is the largest one; it’s an Amazon subsidiary.
In 2020, Twitch made about $2.3 billion in revenue. That’s 23 times more than in 2016.
The company’s advertising revenue also soared from $100 million in 2017 to $750 million in 2020.
Profitability is one of the many great things about this market.
The other one is technology…
AI, Blockchain Could Further Boost Live Streaming
TV streaming is quite simple as a business. Yes, it requires quite a lot of tech infrastructure, but most of the value comes from the content.
With live streaming, it’s the opposite. Technology like artificial intelligence and blockchain are improving video quality and are used for editing, scriptwriting, upload, and other aspects of live streaming.
What does it mean?
It means that a live streaming service has a better tech component than a traditional streaming service like Netflix.
Netflix and other TV streamers are already working in a saturated low-growth market, especially when it comes to the most lucrative markets like the US and Canada.
This is why live streaming and online gaming services look like a more exciting opportunity right now.
We are not recommending any companies working in that area. But we suggest that you pay attention to this space.
As the latest numbers published by Netflix show, the TV streaming revolution is coming close to an end.
The tech and the investor interest are likely moving into other areas, like gaming and live streaming. Adding cutting-edge tech like AI or blockchain could also benefit the startups developing these new technologies.
Thank you for your loyal readership,
The Financial Star team
