Netflix Inc (NFLX)

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Netflix Results Threaten Quibi's Existence
By: 24/7 Wall St. | July 17, 2020

Netflix Inc. (NASDAQ: NFLX) posted an increase of 10 million subscribers in the most recent quarter. Its forecast was not as strong as Wall Street had hoped. The stock promptly crashed. However, the surge in subscribers was bad news for rivals. Consumers, in most cases, will only buy so many streaming services, either until the expense is too high or there are too many shows to watch. Battered startup Quibi may not be able to handle the strain. It is already in great trouble.

How High Did Netflix Jump Compared to Competition?
Netflix paid subscribers reached 193 million, up from 183 million in the previous quarter. No other streaming service can match that, with the sole exception of Amazon Prime, although Amazon.com Inc. (NASDAQ: AMZN) does not break out the figure.

Another emerging winner in the industry is Walt Disney Co.’s (NYSE: DIS) Disney+, which has racked up over 50 million subscribers. Add to that Hulu, which has been in business for close to a decade. AT&T Inc. (NYSE: T) has HBO Max. The list is long.

The Netflix Advantage
One reason Netflix does so well is the hundreds of millions of dollars it spends on programming. Once again, its primary competitor in this regard is Amazon Price. Quibi has a large budget for new shows too.

Quibi has its own very short shows. The theory is that people want to watch programs that last 10 minutes. The company does not post subscriber figures, perhaps because its management is too embarrassed. They raised $1.75 billion, though. News reports indicate it started with a few million early subscribers, but not many of them renewed after their initial period when consumers could watch it for free. The Verge wrote about the extent of this subscriber loss: “Quibi reportedly lost 90 percent of early users after their free trials expired.”

Another sign of Netflix’s success is its huge revenue, which totaled $6.2 billion in the most recent quarter. That was up 25% from the year before. At its current rate of growth, its annual run rate of revenue is likely to be $30 billion. Its growth rate means it muscles out the growth opportunity of more and more of its rivals.

The Proof Is in the Stock
Quibi may have raised $1.75 billion, which probably put its valuation at the time at $10 billion. The value likely has plunged. Netflix’s is $232 billion. The price of its shares is up 62% this year. One reason is likely the rise in the streaming market as people have been shut in at home because of the pandemic.

Can any other streaming service compete with Netflix? With the exception of Amazon Prime, the answer is no.

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