Netflix Stock Faces Competition from YouTube Red and Amazon Prime
The current top video streaming service, Netflix, Inc. (NASDAQ:NFLX) is facing competition threats from both YouTube and Amazon.com Inc. After making new all-time highs earlier this week, NFLX stock is now routing.
Should shareholders be worried? Not necessarily.
Alphabet Inc’s YouTube is in talks with Hollywood studios to license content for its subscription-based “YouTube Red.” The new service would allow YouTube to venture into a Netflix-like streaming service. Meanwhile, Amazon is coming out with another service, “Streaming Partner’s Program,” which will allow third parties to reach out to its “Amazon Prime Video” subscriber base.
Inarguably, it is of concern that the video streaming industry is facing dynamic shifts. However, the concerns do not pose significant threats to Netflix when you look at the company’s business scope.
Why Netflix Will Remain Tops Among Video Streaming Services
The primary reason why Netflix faces little threat is its international growth factor. The company’s international growth has been stellar so far. This year alone, Netflix expanded to Japan, Italy, Australia, Portugal, New Zealand and Spain. The company has been adding high-quality content from across the globe, including movies and shows in foreign languages. The company is also directly working with local producers in various countries, like Mexico and Italy, to launch original local language content for local viewers in the respective countries.
Secondly, Netflix has been able to differentiate itself from competitors on the basis of quality. Plus, the quality factor is working on two levels: 1) there’s the quality of video streaming, whereby users continue to prefer UHD (ultra-high-definition) for a nominal monthly charge, thus beating low-quality free services like YouTube; and 2) there’s the quality of content, whereby the company continues to deliver the best, most acclaimed, award-worthy on-demand content, including many of Netflix’s award-winning and popular original series, like Orange is the New Black, Narcos, Marvel’s Jessica Jones, House of Cards, and Master of None. (Netflix is currently working on 31 additional original shows for the next year.)
In addition, Netflix’s brand recognition remains stronger than ever. Despite HBO’s growing popularity, courtesy of its hit series Game of Thrones, Netflix continues to enjoy dominance due to its strong and plentiful content offering. The service is increasingly popular among millennials and the droves of baby boomers, who’ll soon be hitting retirement age, will bring in more couch potatoes for the company.
Now, it was hinted that the company might consider getting into sports, but that’s only if it has its own league. (Source: “Netflix is open to streaming live sports—on one condition,” New York Post, December 7, 2015.) Naturally, Netflix’s announcement has dealt with a lot of skepticism over the market, since the move will drive management’s focus away from its core business, which doesn’t bode well for the company.
However, the idea shouldn’t be disregarded altogether. ESPN’s sliding subscriber base may be creating a little niche for online streaming services to find their way in. This is something investors definitely need to look out for.
The Bottom Line on NFLX Stock
Netflix is a dominant force in the video streaming industry and the company continues to enjoy the top spot, despite stiff competition. NFLX stock has been one of the top-performing positions of the year and remains a potential handsome growth play for the long run. With a growing international foothold and promising new content lined up for next year, there may be no stopping Netflix stock from soaring.