Back to top

Image: Bigstock

Streaming Wars: Can Netflix Survive the Competition?

Read MoreHide Full Article

On Oct 22, Netflix, Inc. (NFLX - Free Report) said that it plans to raise another $2 billion in debt in to finance original shows and movies and license content from others. The announcement follows the company’s decision to cancel two of its frontline Marvel shows, Luke Cage and Iron Fist, recently. Understandably, Netflix has bigger plans in terms of producing original content.

The company added 7 million new subscribers in the third quarter, surpassing its own estimates. However, with more players jumping the bandwagon, Netflix will face stiff competition from rivals The Walt Disney Company (DIS - Free Report) , Amazon.com, Inc.’s (AMZN - Free Report) Amazon Prime, Apple, Inc. (AAPL - Free Report) , Hulu and AT&T, Inc.’s (T - Free Report) WarnerMedia.

Netflix Trims Marvel Lineup, Plans to Raise Debt

Netflix plans to raise an additional $2 billion in debt to finance original shows and movies and license content from others. This follows the company’s decision to cancel two of its Marvel shows, Iron Fist and Luke Cage. Given that Netflix’s doesn’t release viewership figures, it is still unclear if a lack of interest among viewers made the company take this decision.

That said, Netflix has been aggressively spending on original content, a major reason behind the company’s phenomenal growth over the past few years. And trimming the Marvel lineup may be just a step toward that. The company added 6.96 million subscribers in the third quarter, surpassing its own estimates of 5 million. Year to date, shares of Netflix have gained 62.5%.

Netflix had said that it would spend $8 billion on content in 2018. However, some analysts expect it might go on to spend as much as $13 billion. Raising another $2 billion in debt will take Netflix’s total debt to more than $10 billion. The company ended last quarter with $8.34 billion in long-term debt.

Streaming Rivalry Intensifies

With 130 million subscribers, Netflix is well ahead in the streaming war. However, there lie challenges aplenty, with more players jumping the bandwagon. Although the exact reason behind Netflix axing two Marvel shows is still unknown, it could possibly be because Disney, which owns Marvel, is gearing up to launch its own streaming service next year.

It goes without saying that Disney will be producing content on Marvel characters. Amazon Prime on the other hand too has been focusing on original content under the leadership of Jen Salke, who took over as the head of Amazon Studios earlier this year.

The e-commerce giant is estimated to have spent $4 billion on content last year, which is expected to increase this year, while HBO, owned by AT&T, said that it plans to spend $2.7 billion on original content. Also, Apple is shelling out billions on original content and developing its own streaming service. Apple and Amazon each carries a Zacks Rank #2 (Buy), while Netflix, Disney and AT&T each carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.   

Will You Make a Fortune on the Shift to Electric Cars?

Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge. With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research. It's not the one you think.

See This Ticker Free >>

Published in