Report: Netflix Doesn't Need Friends

Despite the impending loss of two long-running TV hit comedy series, Netflix Chairman & CEO Reed Hastings need not lose too much sleep over the fate of the world's largest streaming video service.

So argues Michael Nathanson, a partner at MoffettNathanson. In his latest SVoD market tracker released earlier this week, the analyst predicts Netflix will survive the upcoming departure of The Office and Friends just fine, thanks, due to its heavy reliance on original programming. Even though those two hit comedy series rank among Netflix's top ten shows, they are not nearly as popular as Netflix's two leading original programs, No. 1 Orange Is the New Black and No. 2 Stranger Things, Nathanson points out. A new survey for MoffettNathanson by HarrisX indicates that original shows make up 15 of the top 20 programs on Netflix, he noted.

"While Friends and The Office remain top shows, Netflix has aggressively invested in original, destination content to grow user engagement," Nathanson wrote. "The risk of losing high-quality comfort content is misunderstood. Library content won't kill the Netflix US subscriber story. However, it will force them to continually spend on riskier, high-profile concepts, market their shows more aggressively, and allow competitors to copy Netflix's initial approach in building out their own services."

For years, Netflix has prepared for this day, building up its content portfolio to the point where it now offers 700 TV series and 80 movies at any one time. Among other things, Nathanson credits Netflix for accruing long-tail content so the service can appeal to a wide variety of viewers.

In his report, Nathanson also pooh-poohs the idea that Netflix's latest price hikes will slow down the service's growth pace. Pointing to the results of a HarrisX survey released this spring, he noted 70% of surveyed Netflix subscribers said they'd be willing to pay even more money for the service: 11% said they would shell out another $5 or more a month.

"Thus, we are optimistic that Netflix's more bearish 2Q subscriber guidance, which incorporated higher churn estimates due to pricing increases, will be easily topped by actual results," Nathanson wrote.

Netflix will report its second-quarter earnings this evening after the stock markets close.

However, Nathanson does see a potential threat to Netflix's continuing dominance of the SVoD market coming from Hulu. With Hulu showing growing strength among younger consumers and Amazon Prime Video faring better with older viewers, he believes Hulu stands a better chance of duplicating Netflix's path to streaming glory.

"In terms of usage, we see that 77% of Netflix streamers watch either daily or a few times a week, followed by Hulu at 76%," he wrote. "Given Hulu's higher reach of younger, more SVoD active demos, we think Hulu can follow Netflix's game plan and move into older demos as the platform and content offerings mature."

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— Alan Breznick, Cable/Video Practice Leader, Light Reading

jdomke1 7/19/2019 | 12:44:26 PM
Stranger Things? I'm not sure how others feel but season 3 of Stranger Things was a disappointment in our household. It was short, I would call it a mini series, disappointing, and seemed to lack a more in-debth story line then the two previous seasons. So many missed opportunities to really delve into the story lines because there weren't enough episodes to do so. Is Netflix now going the British route of having very short series in an effort to crame more content? Hopefully the upcoming The Crown and Lost in Space won't disappoint.I also can't wait for more Umbrella Academy, Altered Carbon, and The Society. But, question like many viewers what happened to Dark Matter, Bordertown, and Pine Gap? Dark Matter might not be a Netflix original but many SciFi fans wondered why the show was dropped and Netflix didn't pick it up. Disappointed how the storyline was left hanging. Much like Firefly, not realized as a hit until after it was cancelled.
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