Videoage International April 2019

10 World April 2019 V I D E O A G E to monetizing. Its content can earn revenues through box office, merchandise, licensing deals, theme parks, and soon, streaming. With its Disney+ service, the firm will throw its full weight (and massive resources) into the streaming ring.” Trainer noted that the “main reason investors are losing con- fidence is that Netflix’s subscri- ber growth has not generated enough revenue to cover the increase in content spending.” Since 2011, he wrote, revenue has increased by $12.6 billion, “which is half the total increase in expenditures over the same time.” Trainer acknowledged that Netflix was one of the first servi- ces to offer video streaming, but today it is facing strong competi- tion that will only become stron- ger when new entrants with vast resources, such as Apple, Disney, Warner Media, and NBCUniver- sal, release their own streaming platforms in the next year. “Ho- wever,” he pointed out, “just as with AOL [which was one of the first major ISPs, and has fallen out of favor with many users], nothing stops competitors from doing the same at equal or chea- per prices.” Trainer also mentioned that studios would pull their content from Netflix and that the SVoD company would likely not even benefit from its recent price in- crease because “raising prices makes it easier for firms to com- pete for subscribers, but Netflix has to raise prices to attempt to stem its unsustainably high cash burn.” To Trainer, “pricing power means a firm can make money while charging lower prices than its competition,” and gave as an example Hulu, which grew subscribers at a faster rate than Netflix when it lowered the price of its most popular plan by 25 percent. “Ultimately,” he said, “to be- lieve in Netflix you have to be- lieve that the company can dra- stically increase its prices (or sign up half the world), reduce the growth in its content spen- ding, and continue to grow its subscriber base at double-digit rates for nearly a decade or lon- ger.” I n the February 5, 2019 edition of Forbes , U.S. researcher David Trainer painted a gloomy picture of Netflix in a story titled: “Reality is Closing in On Netflix.” Trainer started by saying “that investors are losing patience with Netflix’s extraordinary cash flow burn ($13 billion since 2011),” and that “they will not subsidize Netflix’s huge cash losses forever.” Plus, he said, “Debt investors are not happy either. They’ve always been more skeptical and assigned Netflix’s debt ‘junk’ ratings since as early as 2015.” Trainer then explained why “Time is running out for Netflix’s current business model to work: Netflix needs over 500 million subscribers at $20 per month to justify $350 a share. [Netflix has] to show it can monetize its content in the face of mounting competition.” In his view, Netflix currently has 20 competitors. In terms of monetization, Trainer wrote, “Disney is one of the best when it comes Forbes : Netflix is the AOL of SVoD (Continued from Page 8) VideoAge ’s Int’l TV Distribution Hall of Fame Fascinating Stories Honoring 10 Additional Executives Who Built An Industry Volume 2 By Dom Serafini Available in Print and e-Book