Streaming service Netflix has pulled further ahead of its rivals, says Bloomberg’s Lucas Shaw. It added 8.05 million customers in the second quarter and raised estimates for annual sales and profit margins.
The subscriber figures eclipsed expectations in every region worldwide and included 2.8 million new customers in the Asia-Pacific region, with sales climbing by 17% year on year. This growth was partially fuelled by a number of “major hits”.
However, the main driving force was a crackdown on password sharing, as well as a lower-priced subscription plan based around advertising, which now applies to 40 million people. Netflix, with its 27% operating margin and “robust” free cash flows, may be the “envy of the sector”, says Lex in the Financial Times.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
But winning the advertising war “will be easier said than done”. It is still a “minnow” in advertising, compared with the “well-oiled” ad machines of YouTube and Amazon, and it is only just starting to build its own ad-tech platform.
How can Netflix keep growing?
One option would be to show more ads; or it could introduce ads to its other ad-free tiers, taking a leaf from Amazon’s Prime Video where “showing ads is the default mode”. However, this could backfire as Netflix customers “will have less tolerance for ads, and for being asked to pay more to stay ad-free”.
Netflix should ditch its reluctance to engage in dealmaking, says Jennifer Saba on Breakingviews. It should consider bidding for the Max streaming service of rival Warner Bros Discovery, whose management is contemplating selling off assets.
Max “isn’t as profitable as Netflix”, but it also contains successful studio Warner Bros, as well as HBO, which owns the rights to hit TV show, Game of Thrones. While the cost may require Netflix to issue more shares, it might be worth it if it gives the service “valuable intellectual property” to help it “keep viewers and gain more”.
This article was first published in MoneyWeek's magazine. Enjoy exclusive early access to news, opinion and analysis from our team of financial experts with a MoneyWeek subscription.
-
Could investing in sugar protect you during a downturn?Sugar has some defensive qualities during economic downturns, but is now the right time to invest in sugar?
-
Trump’s tariffs: how should the UK respond?Every right-thinking person knows that free trade is a surer route to the wealth of nations than protectionism. So, what is Trump thinking?
-
Falling revenues and mounting debt spell trouble for Jumia TechnologiesStruggling African e-commerce platform Jumia Technologies looks headed for the exit, says Dr Matthew Partridge.
-
Next reports £1 billion in annual profits for the first time – what's next for the retailer?Clothing retailer Next has become only the fourth member of its sector to surpass £1 billion in annual profits. What does this mean for the company's future?
-
Best of British bargains: cash in on undervalued companies in the UK stock marketOpinion Michael Field, Chief Equity Market Strategist, EMEA, Morningstar, selects three attractive UK stocks where he'd put his money
-
Building firm Keller presents low debt and ample scope for growthGeotechnical contractor Keller, which supports vital global infrastructure, boasts rising profits and a cheap valuation
-
PZ Cussons share price down 75% in last decade – why it's one to watchOpinion Once-strong consumer-goods business PZ Cussons is out of favour with the market. That spells opportunity for investors, says Jamie Ward
-
Cash in on the biotech sector with specialist trust BioPharmaOpinion BioPharma has an attractive niche in lending to asset-rich biotechnology companies
-
India's stock market decline wipes out $1.3 trillion in market value – can investors stay optimistic?More than $1 trillion has been wiped off from India's stock market after investors turn to China. Has the emerging-market darling hit rock bottom?
-
Pensions revolution: how to profit from the trends shaping the UK pension systemThe UK pension system is one of the biggest in the world. Big changes are under way, says Rupert Hargreaves
