Netflix is facing a new kind of challenge - and it looks like it is getting the better out of the company -- in all aspects of its existence in the highly-stacked streaming competition today.
With the company's shares plummeting 30 percent in the last quarter, add to that very laggard output for the second quarter and signs that growth for the next quarter might be below estimates, Netflix is in for a rough ride.
The company is seen to report third-quarter earnings to cap its final report just before the release of its streaming service by competitors Disney and Apple Inc.
And investors seem to vote with their feet, judging by the quality of their stock. Netflix's slumping stock shows that Wall Street expects the streaming service to intensify competitive pressures.
Wall Street projects an earnings-per-share of $1.25 on $2.25 billion in revenues for Netflix in the third quarter. Since Netflix announced its EPS for the second quarter, it has since gone after the bears and, unfortunately, dropped more than 21 percent following its disclosure of a decline in subscribers in the US.
NFLX stock settled at $254.55 last September, its lowest level for the year. Though the company has since bounced back, to date these shares are still losing 12 percent year-on-year. The streaming operator was up over 1 percent in volatile trading on Tuesday to hover near the $286 border.
Apple is set to roll out its own Apple TV+ streaming service on November 1, while Disney is also setting the stage for its own platform called the Disney+ on November 12. How these will play out against Netflix as the company tries to stay afloat remains to be seen.
For the time being, market observers perceive the upcoming services as complementary to Netflix, with figures suggesting that few are willing to scrap their subscription just to please the new players.
In a poll conducted by Piper Jaffray involving some 1,500 American subscribers for Netflix - seeing how people feel about rival tech factions - 71 percent said they would not subscribe to Disney+ as of September, and 76 percent said they would not subscribe to Apple TV+.
Nonetheless, those who replied "yes" said when they added Apple or Disney, they had no plans to cancel their Netflix subscriptions.
One of the reasons for this is the huge volume of money that the streaming giant has shelled out into its new programming. Netflix said it would accumulate $2 billion in debt to finance new shows, back in April, for a streaming budget that is currently $15 billion higher.
The company is already breaking its back on a snail-paced growth before these new competitors dominate the game. The company added a measly 2.7 million subscribers in the second quarter of this year, its worst growth performance in three years.
Yet increasing pressure from big software, entertainment, and telecommunications companies, rising prices for top talent, and declining customer growth have coalesced to place the streaming company in a tough spot. Laura Martin, managing director at Needham & Co., said that "In 2020, they're going to lose 10 million customers if they don't have an option to the standard price of $13 a month."
When the company is unable to keep up with its once-solid pace, it may be forced to rethink how it spends its resources. There are indications it is re-tooling, with CNBC divulging late Tuesday that after settling as much as $20 million on exclusives from Dave Chapelle and Amy Schumer, Netflix is pulling back on extravagant comedy specials.
