Question

Go online and look at Netflix latest corporate earnings:

1- what do you think of the performance of Netflix ?

2- what do you think of the expansion of Netflix from a streaming busines to an original content busines?

3- do you think that Netflix has close competition ? From which companies ?

Answer 1

1. Netflix has grown exponentially over the last eight quarters. Below is a snip of the income statement of Netflix where I have added a few lines in yellow highlight which show the year on year growth of the revenue and operating profit for the last 8 quarters and 2 years. The growth in revenue is 135% in 2018 vs 2017, 132% in 2017 vs 2016. Similarly the growth in net income is 217% in 2018 vs 299% growth in 2017. During the holiday season of June 2018, the growth in net income even rose to a significant 586% vs June 2017.

2. Also evident from the snip is the fact that Netflix continues to spend a significant portion of its revenues on 'Cost of Revenues', 'Marketing' and 'technology and Development'. These basically are subparts of the money spent on content development. Netflix mentioned in its 10-K 2018 that it plans to invest significantly on 'In house content development'. Major reason for an increase in operating margins for Netflix is producing its own content rather than  buying rights. Though it started off as a streaming business, with significant portions of investment in content development, Netflix is expanding its horizons and giving stiff competition to pure content players like 'Time Warner', and 'HBO'

3. Netflix not only has competition from other streaming businesses like Amazon Prime and Hotstar, it also has stiff competition from the legacy businesses like Disney and Time Warner Group.

So competitors include:

- Amazon Prime

- Hotstar

- Disney

- Lions Entertainment

- YouTube

- HBO Now

- Hulu

Hope this helpful. All the best, thanks!