Netflix loses 1M subs (and celebrates) + More “good” fear
A quick fix of the latest financial happenings.
Good morning, investors!
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Without further ado…
One Million Fewer Subscribers: Not a Problem
Netflix lost a million global subscribers in Q2.
Actually 970,000, but who’s counting?
Netflix’s standard subscription is almost twice as expensive as it was a decade ago. Considering the company’s massive investment in original content, maybe that’s understandable. Still, raising your prices is practically guaranteed to drive subs away on principle alone.
Yet, investors breathed a sigh of relief when Netflix reported that subscribers fled the platform in droves — management expected to lose about two million subscribers in Q2. So, in a way, only losing one million was a success. Moreover, they also now project to gain back these losses in Q3.
But how will Netflix’s subscriber base hold up if we enter a recession? Here’s Spencer Wang’s, VP of IR and corporate development, commentary during the latest earnings call:
“If you zoom out a bit and look at past economic cycles, at least in the U.S. most forms of entertainment have been fairly resilient to downturns. There's a level of escapism, I think, that entertainment provides. Also, if you look at the Pay TV business over the economic cycle, it tends to be a bit more resilient as well, just because the value of in-home entertainment increases as folks perhaps don't go out as much.”
Netflix remains the king of streaming — but the gap between it and other platforms has narrowed during the company’s slump/stagnation.
Two Charts (And a Table): Time to Buy?
“Be fearful when others are greedy, and greedy when others are fearful.” — Warren Buffett
If we subscribe to Buffett’s motto about fear and greed, then it might be time to get greedy. According to Bank of America’s most recent Global Fund Manager Survey — a survey of approximately 300 institutional, mutual, and hedge fund managers around the world — recession expectations are the highest they’ve been since May 2020.
Along the same lines, BofA’s Bull & Bear Indicator illustrates that the market is extremely bearish — and that now is the time to buy.
Three Eye-Opening Tweets
And finally, we close with three eye-opening tweets.
An “invisible” recession? A strong job market could support it.
No M&A deals = low IB revenues = no bonuses
That checks out.
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Interesting thoughts. I'd argue they still have a growth problem. They're getting away with it in the short term by scaling in Apac + Latam, and hiking prices in more mature markets NA + EU. But their long-term bets in cloud gaming (and recently, advertising), won't go down well. Here's why:
https://twitter.com/Jiten95/status/1554156502457487360