Netflix After Q2 2019 Post-Peak or Strategic Reset?

The 20,000 Foot View: With a market capitalisation        times its current annual net income, Netflix suddenly finds itself scrambling to justify its price-to-earnings ratio. The July        earnings call knocked        off the market capitalisation of the poster-child of the streaming era in a matter of two days – equivalent to the entire market capitalisation of Snap Inc, another former darling of the tech and media landscape. Peak streaming is meeting peak attention and the clash is pronounced and severe for Netflix. With well-funded direct to consumer        threats just around the corner, Netflix needs to recalibrate both its engagement and its revenue mix to win over the next        million.

Key Findings

       of US consumers use Netflix on a daily basis
• The majority of US        year olds are Netflix daily active users (DAUs)
• Netflix domestic subscribers declined by        thousand in        2019
• Netflix international subscription growth in        declined by        to        million
• Localisation strategy is more than just original content
• The next        million Netflix subscribers will come from emerging markets
• Netflix paying subscribers are        more likely than the average consumer to pay attention to brands that sponsor shows than those that just have ads
       of Netflix’s paid subscribers respond favourably to relevant ads –        above the weighted average
• US Netflix subscribers are slightly more tolerant of ads appearing on a streaming video on de-mand (SVOD) service
• US Netflix subscribers over-index for gaming behaviour

Companies and brands mentioned in this report: Apple TV+, Assassins Creed, Cambridge, Disney +, Game of Thrones, HBO, Kahn Academy, Master Class, Mirriad, MIT, Netflix, Nike, Open University, Snap Inc, Stanford, Stranger Things, Warnerflix, WarnerMedia