Netflix
NFLX
recently announced that it has selected
Microsoft
MSFT
as its global advertising technology and sales partner. The streaming giant is set to introduce a new lower-priced ad-supported subscription plan apart from its existing ad-free basic, standard and premium plans.
Netflix has been suffering from stiff competition in the streaming space from the likes of
Apple
’s
AAPL
Apple TV+,
Disney
’s
DIS
Disney+, Amazon prime video, HBO Max, Disney+, Peacock, Paramount+ and TikTok.
Netflix expects to lose two million paid subscribers in second-quarter 2022 because of stiff competition, the unfavorable impact of account sharing, a weak economy, multi-decade-high inflation, the Russia-Ukraine conflict and some lingering COVID-19 disruptions.
The low-priced ad-supported tier is likely to help Netflix attract new customers, particularly in price-sensitive regions like Asia-Pacific and Latin America. In the United States & Canada, as well as in Europe, where Netflix is losing subscribers, the low-priced ad-supported tier is expected to limit the slide.
Moreover, Microsoft’s global presence bodes well for Netflix’s ambition of retaining streaming domination.
Will Netflix’s Solid Content Portfolio Drive Share Price Recovery?
Netflix’s shares gained 1.21% to close at $176.56 on Jul 13 following the news of the partnership. Shares are down 70.7% year to date compared with the Zacks
Consumer Discretionary
sector’s decline of 35.5% over the same time frame.
Netflix’s focus on originals — both movies and TV shows — has been a major growth driver. Its popular original series,
Stranger Things
Season 4, has become the second series to hit a billion hours of viewing time after 2021’s Korean survival-thriller
Squid Game
, which clocked in 1.65 billion hours in its first 28 days.
The company has been leveraging the talent of local producers in Asia lately, and some of its bets have turned into home runs, such as
The White Tiger
and
Crash Landing on You
. Netflix has renewed a raft of its Asian originals lately, including Korean hits like
Squid Game
, teen zombie horror
All Of Us Are Dead
, and
D.P
..
However, competition is increasing for Netflix, which currently has a Zacks Rank #4 (Sell). Apple’s streaming service, Apple TV+, continues to gain recognition with its critically acclaimed and popular shows like
Ted Lasso
. This year, Apple TV+ has earned 52 Emmy nominations, with the second season of Ted Lasso getting 20 nominations overall.
Apple TV+ has reportedly submitted its bid for National Football League’s new Sunday Ticket partner. Disney and Amazon are other contenders.
Disney primarily dominates the live sports streaming space with its ESPN, which is home to several live sporting events like the F1 race, La Liga, Bundesliga, UEFA Champions League and the NBA. Disney+’s expanding footprint has been a growth factor.
Disney recently began offering Disney+, in 16 countries across the Middle East and North Africa. Given the breadth of content of Disney+, the streaming platform is expected to grab the second spot in the region, with a subscriber base of 6.5 million in the region by 2027, trailing only Netflix, which is likely to have a viewer base of 11 million, per Digital TV Research data.
Netflix’s diversified content portfolio, attributable to heavy investments in the production and distribution of localized, foreign-language content, is expected to remain the key catalyst. The ad-supported low-priced tier might just help it regain some of the lost market share in the near term.
You can see
the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here
.
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