In this video, I will be going over a couple of things that might push Netflix (NASDAQ:NFLX) to new heights. It’s something that Netflix CEO Reed Hastings is unwilling to do as of now. I recently talked about the rise of connected TV (CTV) and the new dawn of TV advertising during the Roku (NASDAQ:ROKU) and The Trade Desk (NASDAQ:TTD) videos. Another big catalyst could be the gaming sector.
As of today, Netflix’s model is pretty straightforward: You pay a monthly fee and you get all the entertainment you want with no ads. That model works well when you’re growing fast, but Netflix is maturing in its home market and it could approach a saturation point soon. The company has also reached its target of 60 million to 90 million households in the U.S., as it finished last year with 74.4 million members in North America.
Price increases can’t be done every year, so it might be time for Netflix to look into the ad-supported content world — just like Hulu, YouTube, and The Roku Channel. But that is something Netflix CEO Reed Hastings has repeatedly been against, saying:
We don’t offer pay-per-view or free ad-supported content. Those are fine business models that other firms do well. We are about flat-fee unlimited viewing commercial-free.
It’s a shame because Netflix could leverage its 207 million users and brand name to attract the highest quality of advertisers, and probably premium ad spending. According to eMarketer, the U.S. CTV market is expected to reach $24.76 billion in 2024, up from $13.4 billion this year.
Time will tell if Hastings will change his mind.
The video game industry is booming, and it’s not slowing down anytime soon. Last month, reports came out that Netflix might want to dip its toes into the video game market and is considering a “bundle” of games available via a subscription, like Apple (NASDAQ:AAPL) Arcade. According to a Netflix spokesperson, the company is excited to do more with interactive entertainment. It comes as no surprise since Netflix has been producing series based on video game properties, like Dota, Castlevania, and The Witcher, as well as upcoming shows based on Sonic the Hedgehog and League of Legends.
The Disney effect
Netflix plans to spend $17 billion on content this year. Original content allows Netflix to differentiate itself, which helps drive subscriber growth and justify price increases. Netflix is the largest streaming content provider, and the company’s pursuit of original content is paying off. Currently, Netflix owns eight of the top 10 original series, according to Nielsen. Each year its IP grows bigger, and that means more brand recognition worldwide, more merchandising, more licensing, and maybe in the future, a Netflix theme park just like Disney.
Combine all three points and Netflix could reach $1,000 or more by the end of the decade.
For the full insights do watch the video below.
*Stock prices used were the closing prices of June 7, 2021. The video was published on June 8, 2021.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.
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