Earnings season is upon us – a time where a position can go from being profitable to losing money in seconds. There’s no place to hide as companies must reveal the numbers that matter, free of any PR manipulation, and deliver a business update that doesn’t lie when it comes to performance. We always get a few winners and a few losers, and this time around Netflix is a big loser.
The end of Netflix?
Netflix is one of the breakout inventions of the decade. Paying five pence for a plastic bag is an expense too far but when it comes to Netflix, we’re more than happy to have £6.99 snatched from our bank accounts each month. The difference, though, is that Netflix has taken the baton from YouTube to evolve the online streaming revolution – whereas 5p plastic bags have no new redeeming qualities. The plethora of viewing options available at such ease justifies the monthly subscription, but could this be the beginning of the end for Netflix?
After growing by 30 million subscribers in 2018 alone, the streaming service has taken on just 12 million more subscribers in the first six months of this year- missing estimates. They blame the increase in sub cost for the drop, but are there stranger things to come for the streaming giant?
Not to sensationalise in any way, but this might just be the start of the end for Netflix. Given the amount Netflix spends on securing rights, creating originals and hiring Miley Cyrus for Black Mirror episodes, it’s easy to see where the £8 billion spend on content in 2018 went.
With competitors ready to swoop and attack Netflix’s majority market share, a slowdown in subscriber growth is really not what was needed. Friends and The Office, two of Netflix’s biggest shows, are leaving this year and heading to their own respective network streaming service.
It may be the site that revolutionised the industry, but that doesn’t mean that its success is guaranteed. The next quarter is crucial to prove that this is just a blip and not the start of a colossal demise.
Is this the end of Netflix? At this moment absolutely not. It’s still performing well and its popularity won’t fade away quickly. However, if (and it’s a big if) a competitor can come in and offer as good a service at a similar price, will customers stay loyal?
You will have heard of the brand Asos. They’re the ones with the adverts of good-looking millennials moodily exhibiting clothes while seductively looking at the camera.
But the firm’s business dealings are looking far less attractive than its models. Asos issued a third profit warning in just seven months, leading to its share price inevitably falling 20%. Warehouse issues in Atlanta and Berlin has been attributed to the latest warning, meaning only a limited amount of clothing range could be sold to consumers. It’s said to have lost £3 billion in value since the latest profit warning as annual revenue has been adjusted and now sits at £20 million less than previously expected.
Some analysts believe this latest warning is reflective of a short-term blip for the company, one that will be rectified in due course. So perhaps, for those looking to back Asos now could be the time as its price is cheaper than normal.
Chinese economic slowdown
Cheetahs, the fastest land animals, can travel at speeds of up to 80 mph. If one was to slow down to 70 mph, it would still be travelling at a quick speed. This dodgy metaphor can be used to visualise the Chinese economic situation. Yes, it isn’t growing at the rate it was, but it is still showing rapid expansion.
Also, the trade war with the US is no small issue. Many companies, perhaps none more so than Huawei, have felt the brunt of the conflict and sales have been directly impacted. So, assuming the trade war is not a long-term affair and a resolution will be found, is there anything to worry about? Of course the economy won’t be growing as quickly as before, and it’s still e
With China’s growth forecast to halve in the next few years, and the fact that a slowdown began before the trade war ignited, there are suggestions that the issue is more deep-rooted.
To combat the 2008 financial crises, China pumped money into its economy in different ways to stimulate growth. It worked, but at a cost – $40 trillion to be exact. That’s said to equate to 15% of total world debt, 300% of China’s GDP.
The government are now implementing measures to try to decrease the debt, which is potentially holding back growth. Consumers are feeling the effects as well. Many are choosing to save as they worry about the future of the economy while carrying the burden of rising personal debt.
With the trade war making all the headlines, perhaps it’s easy to set the blame for the slowdown there, but is that simply masking long-term sustainability issues with the Chinese economic model that are now coming unstuck?
It’s definitely a possibility. The last quarter’s figures have put the question on the table. Next quarter’s might substantiate the theory and really suggest that China might be in a bit of trouble going forward.