Disney, Warner Bros. Discovery, Paramount and Roku all dropped between 5 to 8 percent at market close amid new streaming worries as Netflix dropped 35 percent after disclosing a subscriber loss.
But the Netflix hangover is also seen as an overhang for other big entertainment and streaming stocks. Competitors like Disney, Warner Bros. Discovery, Paramount and Roku all dropped between 5 to 8 percent at market close on Wednesday.“Until proven otherwise, the growth slowdown at Netflix combined with a lower long-term margin outlook is a negative read for its streaming competitors at Walt Disney, Warner Bros.
Subscriber churn has impacted revenue growth, and aspects of Netflix’s distribution model — releasing episodes all at once for binge watching, rather than sticking to a weekly release schedule — could be revisited to remind subscribers why they are and should continue to keep paying for the service.“Netflix’s business model presents a structural flaw that actually encourages its subscribers to churn out when finances are stretched,” Wedbush analyst Michael Pachter in his Wednesday report.
Pachter noted that while “wealthy subscribers will have no problems maintaining four to five streaming subscriptions,” those who are below the median income will struggle to continue paying for three different services, exacerbating the churn Netflix faced in the most recent quarter when it lost 200,000 subscribers — the most coming from the U.S./Canada region.
Though other rival services have found success with ad-supported offerings, Lightshed Partners analyst Rich Greenfield is less optimistic about the overall impact on streaming. “It is scary if the only way to reinvigorate growth is offering cheaper products that worsen the consumer experience, essentially making it more like the dying linear TV experience,” Greenfield said in a recent report.But Greenfield added that SVOD is “certainly nowhere near as profitable as the legacy businesses that streaming is replacing.” That, in itself, the analyst added, is “not an encouraging sign for investors in the sector.
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