Big guns are coming for Netflix

LONDON — The online video-streaming service Netflix, which many or should I say most of us access for a binge watch of a favourite series or movie has had little competition over the last years. It has been the reigning media stock in the S&P 500 Index for six of the last eleven years and its gain so far in 2019 is 37%. But serious competition is coming with the announcement that Walt Disney, Apple and AT&T, which now owns WarnerMedia will begin to roll out their own Netflix-like products. And just to give you an idea of what that means; in the case of AT&T, it now has HBO in its stable which is a major draw card for viewers of "Game of Thrones". When Apple announced its streaming service, it brought in Steven Spielberg and Oprah Winfrey for the launch. Some may say Netflix is so far ahead, it is like Usain Bolt at his best smiling for the cameras as he breaks another world record. But Laura Martin, a senior entertainment analyst at Neeham & co told Bloomberg's Lisa Abramowicz and Paul Sweeney that Netflix could be in for serious competition… – Linda van Tilburg

My concern about Netflix is that they've been monopolist with other people's programming for most of the last seven years and now they're going to get companies competing with them that not only have deeper pockets, but also have a lower marketing cost and a lower content cost because they own their own libraries. In the case of Disney and Warner Bros, which is now owned by AT&T, they have 50 years of programs that they've already paid for and amortised so it's a lower cost of content because Netflix has to pay cash for all their original content. And then each of those companies have sister subsidiaries that they can advertise for free. Disney owns ABC. They can put their own 30-second spot telling you that Disney Entertainment exists. Netflix has to buy every single spot of paid media. So, both of those companies have a lower cost-to-content and a lower marketing cost. In the case of Apple, which spent 90 minutes sort of talking about their new streaming service: they do $50bn/year free cash-flow. Netflix spends $13bn and has to borrow $3bn of it. If actually, Apple started spending $13bn, you wouldn't notice because they'd still have $40bn to buy in shares or pay dividends.

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