Netflix was the original streaming giant — and it’s used that incumbency to largely stay ahead of everyone else entering the digital-TV universe.
But as costs of creating content nosedive, at least one analyst is wondering at what point Netflix will curtail its original production.
“The question is how much content do you need to create, and at what point do you have enough?” says Rich Greenfield of BTIG.
Greenfield has been covering the media and technology space for the better part of two decades, beginning at Goldman Sachs. In his seven years at BTIG, Greenfield has loudly warned about the death of traditional media companies while celebrating the rise of so-called disruptors.
“The cable broadcasting ecosystem is being pressured,” Greenfield told Business Insider. “People want to to watch whatever they want, whenever they want, and to binge without 20 minutes of commercials.”
While cable networks are slowly making the transition from a linear, broadcast format, they still lag well behind Netflix in both subscribers and content. Greenfield expects Netflix to hit 54.9 million US subscribers by the end of 2017. By comparison, the four largest cable companies only have 48.61 million, according to Leichtman Research Group.
Competitors have a long way to go if they want to catch up, especially outside of the United States, which has been the main source of Netflix’s new growth in the past year. They do, however, have one thing on their side: Americans still love TV.
“The average American is still watching four to five hours of TV a day,” says Greenfield. “This won’t be winner-take-all, there will be lots of winners.”
Last month, Greenfield raised his price target for Netflix to $US225, roughly 33% above where shares were trading Friday afternoon.
“The key asset that Netflix has is size. It’s 100 million subscribers ahead of all of its peers,” said Greenfield. “This size gives it the ability to invest more heavily in content, which leads to more content that consumers want to watch, more watch time, and stickier subscriber. It’s a virtuous circle that’s really fuelling Netflix.”