CFRA media and entertainment analyst Tuna Amobi spoke to Business Insider’s Sara Silverstein about what 2018 holds for Netflix. According to Amobi, “This year is going to be an inflection for Netflix.” Amobi thinks that one of the biggest threats to Netflix in 2018 is other media companies, like Disney, taking their content direct-to-consumer. Following is a transcript of the video.
Sara Silverstein: What does 2018 look like for Netflix?
Tuna Amobi: Netflix, I think, has really reached an inflection. This year is going to be an inflection for Netflix where they’re going to, for the first time in their history, generate global profitability. That’s a very important milestone for Netflix. The international business is going to gain even more traction and a lot has been said about the potential saturation in the domestic market for Netflix. Their results in the past several quarters show that there could be additional upside even within a domestic market. So Netflix has become the preeminent disruptor. And I think they’re starting to reap the benefits of the content investments that they have made over the years and they will take those investments even higher this year in 2018.
Silverstein: And what’s the biggest threat to Netflix? What could derail their success?
Amobi: One of the biggest threats that I see is the idea of a lot of media companies taking their content direct-to-consumer. We heard Disney make that groundbreaking announcement that they’re going to pull their content from Netflix and go direct-to-consumer with their Disney and ESPN brands. So as you think about the entertainment landscape, a lot of media companies are watching and they’re kind of stepping out of that paradigm where Netflix, as much as they’re getting a lot of money from Netflix for their content, but they’re starting to view Netflix not necessarily as a friend but potentially as a direct competitor. So I think you’re going to see a new paradigm where Netflix is going to be competing not just against the traditional media companies but also some of the Internet and technology companies that are getting ready and starting to spend significant amounts in content investments.
Silverstein: And is Facebook Watch a real competitor to Netflix?
Amobi: I do believe Facebook Watch is in the early goings. I wouldn’t necessarily characterise them as the head-to-head competitor now. But clearly, Facebook is very serious about their content and all of the investments that they have made. And we expect them to ratchet that up this year. Ultimately, I think you’re going to have a potential shakeout where you’ve got the haves and the have-nots, right? The haves are going to be the large media and technology companies, including Netflix. And then, the have-nots are going to be those that are going to find it tough to keep up with the acceleration in content and investments and creativity and innovation that we’re all seeing in this new world order.
Silverstein: Who’s the biggest competitor for Netflix? Who do they have to look out for? Is it Hulu, Amazon, Disney?
Amobi: All of the above. All of the names you threw out are ratcheting up their level of investments. Now, Netflix, to be sure, is still far and away the biggest spender in terms of content. But all these names, whether it’s Hulu, Amazon, Disney, they’re all stepping up their game. So I think Netflix has a very good reason to look over its shoulder in this year 2018 and beyond.
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