Netflix Stock Price
In the modern era of tech wars, one front is heating up: streaming. Now that programs have the ability to become truly global successes due to the accessibility through the Internet, shows have come to define culture in a way that was previously unheard of.
The ability to have such wide-ranging success is what makes the Netflix, Inc. (NASDAQ:NFLX) and Amazon.com, Inc. (NASDAQ:AMZN) competition for streaming hits one to watch for investors. More importantly for those looking to invest, have we entered a Netflix stock price vs. Amazon stock price situation? Or is there room enough for both to thrive in the streaming industry?
Let’s start with Netflix and where it stands in the streaming market. After all, while Amazon is making progress with “Amazon Prime TV” and other forays into streaming and program production, Netflix stock is still the king of streaming.
With monster hits like Stranger Things, House of Cards, and The Crown making waves for their production value and quality, Netflix has both the critical appeal and the support of fans to help propel it forward for the foreseeable future.
The company currently boasts 93.8 million worldwide subscribers and has seen uninterrupted Netflix subscriber growth quarter-over-quarter since 2011. And so far, the trend line shows no sign of slowing down. (Source: “Number of Netflix streaming subscribers worldwide from 3rd quarter 2011 to 4th quarter 2016 (in millions),” Statista, last accessed March 31, 2017.)
There are, of course, those who believe that Netflix has reached the end of its growth line, and that it’s only a matter of time before the company will begin to slow. But as it currently operates in over 200 countries across the globe, there’s certainly no dearth of potential customers.
Instead, some analysts believe that newer rivals like Amazon Prime TV and other upstart streaming services (of which there are many) will begin to cut away at Netflix’s market share. (Source: “Netflix Is Winning the Streaming Race—But for How Long?” Fortune, March 10, 2017.)
But to adopt that line of thinking discounts many of the reasons why people flock to Netflix. One of the main contributors to the stellar Netflix user growth the company has witnessed for many years now is the dedication to quality programming.
You see, where once Netflix was once a simple streaming website, albeit the first to go mainstream, what’s really pushing the company forward now is the ability to produce quality shows that can’t be viewed anywhere else.
And it is shelling out money to make sure it keeps those production values high. The company is projected to spend more than $6.0 billion in 2017, up from $5.0 billion in 2016. This is also double what Time Warner Inc‘s (NYSE:TWX) HBO spends, despite HBO producing Game of Thrones and other shows with famously expensive demands. (Source: “Netflix: The Monster That’s Eating Hollywood,” The Wall Street Journal, March 24, 2017.)
Netflix isn’t without its own costly programming, with dramas like The Crown running nearly $10.0 million an episode in order to faithfully produce the period drama.
Such high spending is in line with its $60.0 billion market capitalization, but this number is 300 times more than Netflix 2016 earnings, creating a rather daunting deficit.
Another pressing issue facing the streaming giant is the increase in debt. Since 2012, Netflix has ballooned its debt from $195.8 million to $3.4 billion.
But this has done little to harm the Netflix stock price. The company is up 17% since the year began and 43% over the last 12 months.
The key for the company in order to maintain a steady increase in stock value is to keep its subscriber numbers healthy and growing. And that’s where Amazon comes in.
Amazon Stock Price and Streaming
Chart courtesy of StockCharts.com
It’s easy to see why many companies are reluctant to challenge Netflix in the streaming arena. The company has the brand recognition, strong growth, and excellent programming in order to maintain healthy growth numbers for the foreseeable future. But Amazon believes it can dethrone—or at the every least, make a niche for itself—in the competitive streaming market.
The Netflix stock advantage over Amazon is that Netflix has an established brand loaded with original series that have become huge successes in and of themselves.
Amazon, in other words, is playing catch-up.
Series like Transparent have struck a chord among critics and fans, but Amazon has yet to score a hit on the same level of some of Netflix’s biggest triumphs.
Another thing to note here is that the Amazon stock price is not necessarily correlated to its Amazon Prime TV subscribers. Many people may not even be subscribing for Amazon Prime for the television, instead opting into the service for its various other benefits, like faster delivery and early access to deals. And that’s both good and bad for Amazon in the streaming world.
A huge Netflix advantage over Amazon is that it needs streaming to work to stay alive. After all, that’s all it does. Amazon has a whole other empire based in shipping, and while finding a revenue stream in online shows would be nice, it’s hardly crucial that Amazon win the streaming wars to stay in business. The same cannot be said for Netflix.
While Amazon user growth has been strong since the service was first initiated, some analysts believed that the company is slowing down. While it counts 66 million subscribers currently, again, it’s hard to say how many of those paying customers are even engaging with the Amazon programs. (Source: “Amazon has at least 66 million Prime members but subscriber growth may be slowing,” CNBC, February 4, 2017.)
According to a survey conducted last year by CutCableToday, the vast majority said that free two-day shipping was the main reason for their purchase of Prime. Not to mention that a fifth of all subscribers claimed to have never used the streaming service, and a whopping eight percent didn’t even know it existed. And to add insult to injury, of the respondents to the survey, 38% claimed that they use Netflix on a daily basis, while Amazon Prime only cobbled together 10%. Not to mention that 84% of subscribers also have memberships with Netflix. (Source: “20% Of Amazon Prime Members Still Aren’t Using Its Video Streaming,” CutCableToday, April 27, 2016.)
So to recap: Netflix spends more, has a more established brand, better programming, more international appeal, and overall better incentive for streamers to join its subscription versus Amazon Prime TV.
Sure, Amazon may one day have the clout and potential to be a force in the streaming world, but at the moment, it simply can’t compete with the Netflix powerhouse.
And that’s okay. At least for both the Netflix stock price and Amazon stock price.
Amazon has seen a 14% growth in 2017, and nearly 47% over the past 12 months. The company has a many different plays going on in the technology, shipping, and media worlds. In fact, the Oscar darling Manchester by the Sea was lauded as one of the finest films of the year; it was produced by none other than “Amazon Studios.”
Which goes to show that progress is being made when it comes to Amazon’s production of quality screen offerings. But at the moment, it still has a lot of catching up to do if it wants to match Netflix.
Amazon Prime vs. Netflix
There’s really no competition between the two services when it comes to streaming, at least not yet.
Netflix is laser-focused on the streaming world and has years of experience navigating the space, whereas Amazon is a relative newcomer that has yet to score a mass-appeal, culturally impactful show at the same level of Netflix’s original productions.
Netflix also has a stronger incentive to own the streaming market; it’s the entirety of its business, after all. Amazon Prime TV could crash and burn and it would hardly make a dent in the Amazon empire.
Which brings us to the final question: can Netflix and Amazon Prime TV exist side by side?
If you reframe the question less as Netflix stock price vs. Amazon stock price and more of how can these two providers coexist in the streaming world, the picture becomes less bleak for Amazon.
Amazon can afford to keep churning out programs and expanding its streaming service at a steady pace. Does that mean it is likely to catch Netflix in the foreseeable future? Probably not. But what it does mean is that it can certainly become a profitable avenue of revenue for the tech giant, without necessarily having to topple the streaming dynasty of Netflix.
Netflix wears the crown for now and will continue to do so for a good while. What Amazon should do instead is find a way to slowly but surely carve out a niche with Amazon Prime and encourage its usage among its subscribers. Cultivating that base is the first step to creating, at the very least, a worthy competitor to Netflix stock.