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Despite experiencing a decline in share value due to slowing growth and increased competition from traditional media giants, Netflix (NFLX - Free Report) has emerged as one of the most unexpected winners this year. According to the Motley Fool, its stock has surged by 44% year to date and an impressive 137% over the past year, following a sharp decline of over two-thirds in value spanning 2021 and 2022. The significant gains can be attributed to the implementation of password-sharing fees and the introduction of a new ad-supported subscription option.
Introduction of Paid Sharing
Netflix's introduction of paid sharing has sparked significant controversy. In the past, the streaming service tolerated password sharing as a way to promote its platform and potentially convert borrowers into direct subscribers. However, as Netflix's user base matured, the company decided to restricts account usage to the account holder and their household, offering an option to share the account with non-household members for an additional $7.99 per month.
The move was welcomed by analysts, perceiving it as a nearly cost-free way to generate substantial incremental profit. Since implementing this change in May, Netflix's stock has surged, and there has been a notable increase in new subscriptions.
Impact of Netflix's New Ad Tier
The introduction of the ad tier is anticipated to offer long-term benefits by creating an additional revenue stream and supplementing subscriber payments. While the majority of subscribers are projected to stick with the ad-free tier, Netflix's ad-supported option has successfully attracted new subscribers.
Since its launch just six months ago, the ad tier has already gained nearly 5 million subscribers as of May. Remarkably, in markets where it is available, over 25% of new subscribers are opting for the ad-supported tier.
Entering the next phase of its content growth, the streaming company looks to optimize costs and enhance user engagement.
Increasing Global Expansion
As Netflix embraces a more deliberate strategy to enhance content engagement, the company’s push for global content comes up as a main driver for fuelling future growth. As per Yahoo Finance, Netflix Co-CEO Ted Sarandos reaffirmed the company's pledge to invest $2.5 billion in original Korean content within the next four years.
Sarandos revealed that approximately 60% of Netflix users have viewed a Korean show, highlighting the significant viewership of Korean content. Currently, around two-thirds of Netflix subscribers originate from outside the United States.
Generally, non-U.S. productions offer a cost advantage while upholding exceptional quality, which presents a favorable scenario for Netflix. The growing demand for international content, coupled with its increasing acceptance among U.S. audiences, further supports this trend.
ETFs in Focus
Against this backdrop, investors can play Netflix-heavy ETFs to ride the streaming wave. Below, we highlight a few ETFs with exposure to Netflix.
The MicroSectors FANG+ ETNs is linked to the performance of the NYSE FANG+ Index, which provides exposure to a group of highly-traded growth stocks of next-generation technology and tech-enabled companies. With a basket of 10 securities and an asset base of $131.88 million, the fund charges an annual fee of 0.58%.
FNGS has an exposure of 9.18% to Netflix and has a Zacks ETF Rank #3 (Hold). MicroSectors FANG+ ETNs has generated 51.25% over the past year and 72.06% year to date.
Invesco Dynamic Media ETF
The Invesco Dynamic Media ETF is based on the Dynamic Media Intellidex Index, which comprises stocks of U.S. media companies principally engaged in the development, production, sale & distribution of goods or services used in the media industry. PBS has a basket of 31 securities and has gathered $31.45 million in its asset base. The fund charges an annual fee of 0.63%.
With an exposure of 5.86% in Netflix, Invesco Dynamic Media ETF has a Zacks ETF Rank #4 (Sell) and a Medium risk outlook. The fund has earned 6.99% year to date but has lost 0.04% over the past year.
The First Trust S-Network Streaming & Gaming ETF seeks to track the performance of the S-Network Streaming & Gaming Index. The fund commands an asset base of $4.36 million and has a basket of 44 securities. BNGE charges an annual fee of 0.70%.
BNGE has major allocations to the entertainment sector, with 45.08% of the assets. First Trust S-Network Streaming & Gaming ETF has an exposure of 5.32% in Netflix, and has generated 14.44% over the past year, adding 24.20% year to date.
Fidelity MSCI Communication Services Index ETF (FCOM - Free Report)
The Fidelity MSCI Communication Services Index ETF seeks to track the performance of the MSCI USA IMI Communication Services 25/50 Index. With a basket of 111 securities and an asset base of $735.69 million, the fund charges an annual fee of 0.08%.
FCOM has an exposure of 5% in Netflix, along with Zacks ETF Rank #2 (Buy) and a Medium risk outlook. Fidelity MSCI Communication Services Index ETF has earned 10.48% over the past year and 27.63% year to date.
Disclaimer: This article has been written with the assistance of Generative AI. However, the author has reviewed, revised, supplemented, and rewritten parts of this content to ensure its originality and the precision of the incorporated information
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Ride the Streaming Wave With Netflix ETFs
Despite experiencing a decline in share value due to slowing growth and increased competition from traditional media giants, Netflix (NFLX - Free Report) has emerged as one of the most unexpected winners this year. According to the Motley Fool, its stock has surged by 44% year to date and an impressive 137% over the past year, following a sharp decline of over two-thirds in value spanning 2021 and 2022. The significant gains can be attributed to the implementation of password-sharing fees and the introduction of a new ad-supported subscription option.
Introduction of Paid Sharing
Netflix's introduction of paid sharing has sparked significant controversy. In the past, the streaming service tolerated password sharing as a way to promote its platform and potentially convert borrowers into direct subscribers. However, as Netflix's user base matured, the company decided to restricts account usage to the account holder and their household, offering an option to share the account with non-household members for an additional $7.99 per month.
The move was welcomed by analysts, perceiving it as a nearly cost-free way to generate substantial incremental profit. Since implementing this change in May, Netflix's stock has surged, and there has been a notable increase in new subscriptions.
Impact of Netflix's New Ad Tier
The introduction of the ad tier is anticipated to offer long-term benefits by creating an additional revenue stream and supplementing subscriber payments. While the majority of subscribers are projected to stick with the ad-free tier, Netflix's ad-supported option has successfully attracted new subscribers.
Since its launch just six months ago, the ad tier has already gained nearly 5 million subscribers as of May. Remarkably, in markets where it is available, over 25% of new subscribers are opting for the ad-supported tier.
Entering the next phase of its content growth, the streaming company looks to optimize costs and enhance user engagement.
Increasing Global Expansion
As Netflix embraces a more deliberate strategy to enhance content engagement, the company’s push for global content comes up as a main driver for fuelling future growth. As per Yahoo Finance, Netflix Co-CEO Ted Sarandos reaffirmed the company's pledge to invest $2.5 billion in original Korean content within the next four years.
Sarandos revealed that approximately 60% of Netflix users have viewed a Korean show, highlighting the significant viewership of Korean content. Currently, around two-thirds of Netflix subscribers originate from outside the United States.
Generally, non-U.S. productions offer a cost advantage while upholding exceptional quality, which presents a favorable scenario for Netflix. The growing demand for international content, coupled with its increasing acceptance among U.S. audiences, further supports this trend.
ETFs in Focus
Against this backdrop, investors can play Netflix-heavy ETFs to ride the streaming wave. Below, we highlight a few ETFs with exposure to Netflix.
MicroSectors FANG+ ETN (FNGS - Free Report)
The MicroSectors FANG+ ETNs is linked to the performance of the NYSE FANG+ Index, which provides exposure to a group of highly-traded growth stocks of next-generation technology and tech-enabled companies. With a basket of 10 securities and an asset base of $131.88 million, the fund charges an annual fee of 0.58%.
FNGS has an exposure of 9.18% to Netflix and has a Zacks ETF Rank #3 (Hold). MicroSectors FANG+ ETNs has generated 51.25% over the past year and 72.06% year to date.
Invesco Dynamic Media ETF
The Invesco Dynamic Media ETF is based on the Dynamic Media Intellidex Index, which comprises stocks of U.S. media companies principally engaged in the development, production, sale & distribution of goods or services used in the media industry. PBS has a basket of 31 securities and has gathered $31.45 million in its asset base. The fund charges an annual fee of 0.63%.
With an exposure of 5.86% in Netflix, Invesco Dynamic Media ETF has a Zacks ETF Rank #4 (Sell) and a Medium risk outlook. The fund has earned 6.99% year to date but has lost 0.04% over the past year.
First Trust S-Network Streaming & Gaming ETF (BNGE - Free Report)
The First Trust S-Network Streaming & Gaming ETF seeks to track the performance of the S-Network Streaming & Gaming Index. The fund commands an asset base of $4.36 million and has a basket of 44 securities. BNGE charges an annual fee of 0.70%.
BNGE has major allocations to the entertainment sector, with 45.08% of the assets. First Trust S-Network Streaming & Gaming ETF has an exposure of 5.32% in Netflix, and has generated 14.44% over the past year, adding 24.20% year to date.
Fidelity MSCI Communication Services Index ETF (FCOM - Free Report)
The Fidelity MSCI Communication Services Index ETF seeks to track the performance of the MSCI USA IMI Communication Services 25/50 Index. With a basket of 111 securities and an asset base of $735.69 million, the fund charges an annual fee of 0.08%.
FCOM has an exposure of 5% in Netflix, along with Zacks ETF Rank #2 (Buy) and a Medium risk outlook. Fidelity MSCI Communication Services Index ETF has earned 10.48% over the past year and 27.63% year to date.
Disclaimer: This article has been written with the assistance of Generative AI. However, the author has reviewed, revised, supplemented, and rewritten parts of this content to ensure its originality and the precision of the incorporated information