Netflix rating downgraded to underperform from neutral

Netflix rating downgraded to underperform from neutral


Trends of visual entertainment keep shifting. From theatre to cinema to television, the new vogue is streaming platforms. Entertainment is one of the largest industries. Gradually streaming platforms are occupying the significant share of the entertainment business. It is projected to grow better in the future. The convenience offered by the platform to watch anytime and anywhere (Video On Demand) has a greater appeal than other platforms. Hence giving large profits and subscriber base to OTT (Over The Top media service) platforms. Netflix, Amazon, YouTube are some of the OTT behemoths. Netflix is the largest streaming OTT platform, with a revenue of about US$ 11.7 bn. It has a subscriber base of 158 million across the globe.

However, in the last two months, 4 Wall Street Brokerages have downgraded the rating for Netflix shares. Needham being the recent brokerage that downgraded Netflix from neutral to underperform. It said in the year 2020, Netflix could lose 4 million premium subscribers in the U.S alone. The U.S. accounts for one-third of Netflix’s subscriber base. Stiff competition from proliferating streaming sites, high subscription price, aversion to advertises are probable reasons listed by Needham. Several competitors are emerging in this sector, threatening the domination of Netflix. OTTs such as Amazon, Disney, Hulu are slowly picking grip and offering attractive deals to attract consumers. Experts say they could steal the market share of Netflix as they are a lot cheaper. Netflix does not offer a tiered subscription like other platforms. Also, its aversion to advertises makes it lose a considerable revenue share. Advertisements on OTTs enjoy a profitable percentage share in revenue like subscriptions. Other major concerns for Netflix are programming costs and stock valuation.  Also, as of September 30, the debt pile of Netflix stands at $12.43 billion which is a concern for investors.

However, Netflix dominated the nominations for Golden Globe Awards. Its shows are nominated in 17 TV categories and 17 Movie categories. In the generation of content worship, Netflix is providing just that. It planned to spend US$ 15 billion on content in 2019. Sops like cheaper subscription versions, additional revenue generation from different segments can support Netflix. Pragmatic decisions can help maintain the elite position Netflix commands.

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