Netflix Has 175 Days Left To Pull Off A Miracle... Or It's All Over

Last year, half of Americans aged between 22 and 45 watched zero hours of cable television. And nearly 35 million households have given up cable television over the last decade.

All of these people are targeting streaming services such as Netflix (NFLX). Today, more than half of US households subscribe to a streaming service.

The media call this "cable cutting".

This trend is much more destructive than most people think. The fall of cable television releases billions of wealth in the stock market.

In combination, America's top five cable companies are worth over $ 750 billion. And most investors believe that Netflix will claim the majority of the profits the cable leaves behind.

So far they have been right. Have you seen the Netflix share price? Since 2009, it has risen by 8,300%, even surpassing Amazon.

But do not let the past success of the company mislead you. Because Netflix is ​​not the future of television.

The only thing that matters

Netflix changed the way we watch TV but did not change what we are watching.

They have achieved their incredible growth by separating the distribution from cable companies. Instead of watching a TV show or a movie, people are now watching Netflix. This is not sustainable. In a world where you can watch virtually everything whenever you want, the dominance in content is very important.

The management of Netflix knows that this is the most important thing. The company has spent $ 12 billion on developing original shows last year. In 2018, they released 88% more original programs than in the previous year. And the cost of original shows and movies is expected to reach $ 15 billion this year, investing more in content than any other US television network.

In order to finance its new performances, Netflix takes huge amounts of debt. Currently, they owe creditors $ 10.4 billion, which is 59% more than last year. The problem is that no matter how much Netflix spends, they have no chance to catch up with their biggest rival ...

Disney enters the race

Walt Disney (DIS) is one of the most iconic companies in America. Walt Disney created Mickey Mouse as early as 1928. Over the next eight decades the company built an empire. Last year, more than 160 million people visited their amusement parks. It is among the largest media companies in the world. But over the last decade, a major part of their activity has been interrupted.

More than a third of Disney's revenue comes from the cable business. As you may know, Disney has a leading sports network ESPN and ABC News. They make money providing this content to millions of Americans through cable vendors like AT & T. As you can imagine, removing the cable has affected this business.

Disney's cable business has stalled over the last seven years. But after about 175 days, Disney has scheduled to release its own streaming service called Disney +. It will charge users $ 6.99 per month - about $ 6 cheaper than Netflix, downloading much of Netflix's content.

That's a big deal.

Goodbye Netflix

Imagine this ...

Disney publishes a blockbuster as Avengers: Endgame on its platform the same day it goes into cinemas. In a few weeks she is no longer in the cinema. You can not buy it. You can not rent it. The only way to watch is to subscribe to a Disney service.

For example, the only place where your kids or grandchildren will be able to see Toy Story 4 and Frozen 2 can be at Disney +. Can you imagine how many parents will sign up for this? At a price of $ 6.99 per month, what family with children under 12 will not subscribe?

Disney also owns 60% of America's second-largest and fastest-growing streaming service, Hulu.

They showed that they can create movies and shows that people want to watch. No competitor can match that.

Meanwhile Netflix will lose many of its best content and potentially millions of subscribers who switch to Disney +.

While Netflix sinks into debts by "trying out" new shows, Disney already has the best of the best in its arsenal.

Source: Forbes

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