Seth Schachner, managing director at Strat Americas, joins Cheddar News to discuss why Netflix shares are falling.

Between Bells

Netflix Shares Sink as Streaming Space Grows More Competitive

the rebels back guys on this monday and baker machado in new york and it was only a matter of time before netflix started to feel the pressure from other streamers in its recent quarter fourth quarter earnings report, the platform admitted that streaming competition is eating into their growth. Netflix shares fell more than 18% just hours after they forecasted just 2.5 a million net new global subscribers for the first quarter. The company also announced last week that they're raising the prices here in the US and Canada to help her curb those numbers. So joining us now to discuss is Seth Shatner, managing director at Stratton America's Seth such a pleasure to have you here, thank you so much for joining us. So what do you think is causing this period of slow growth for netflix? What's your take care? Great to be here baker. Thanks for having me. Well, you know, some of what is happening with netflix is just classic, big media companies stuff. They're, you know, they're shifting from being this incredibly high growth startup into, you know, perhaps a little bit more of a mature media company. So, you know, you are seeing price competition uh and just broad content competition, competition certainly from HBO and Disney going at them. And you know, there there there's certainly been a price increase in the U. S. Market as well and that usually when you raise the price, you you drop some subscribers, but they're they're doing opposite things actually in different international markets, but I think um the real the real thing that's happening here. Um, you know, the real underlying big question isn't so much about the short term, it's really about streaming as a business actually, and I think not just Wall Street, but anyone kind of in the business of entertainment is starting to look at the enormous volumes of programming that are being produced, the amount of money that's going into two To produce those and kind of looking at the longevity of that and it's, it's a, it's a pretty distinct thing. And I think, I think people are starting to realize, you know, streaming is, is maybe not as wildly profitable as a business that, that everyone thinks it'll be or high growth business. And that's probably why you're seeing some of these events. Well, that's, that's interesting because we were just saying, by the way, the year to date on netflix stock granted the year today, it's only 24 days in, but it's down 30% so far this year. And it's kind of interesting set because for the previous sort of quarterly reports reed Hastings and ted Sarandos had always sort of said their biggest competition was sleep, it was video games, it was never all the streamers. This is sort of the first time they've actually admitted that the streaming competition is actually, is here now. How significant is that basically, just admitting that right there? I think it's very significant and I think, you know, look, HBO max is doing a phenomenal job with new programming. Um, you're starting to see a lot of interesting competition from Disney who to some degree has struggled, but really trying very hard to bolster to bolster Disney plus actually in different ways and some of the other studios out here in L A R and I think, you know, the real, I think the real fight now is on the international front and it's over programming and you're seeing markets like Korea and latin America becoming central, you know, pieces in the, in the puzzle. And I think it's fair to think that there will be plenty of non american competitors, you know, out there, local competitors like Univision or in asian markets. So I think it's, I think it's certainly a, a real piece of the puzzle in terms of looking at the, the other thing I would say, you know, is that film studios production companies, they roll out shows, they don't necessarily roll them out like clockwork. So they'll be, you know, a new bridge Norton next year, there's going to be, you know, and something called the atom project that Disney's, excuse me, that netflix is bringing out and some of this stuff is just kind of cyclical that doesn't always lend itself to a Wall Street analyst looking at it, it is a creative business at the end of the day. So what are they were adding eight million subscribers for the last eight years each quarter and it's a little bit slower. I don't know, it's still, it's still an extremely strong story to be well, with that being said then, do you consider netflix to be a growth stock still now the competition's here and now that basically we're sort of in a different phase of the pandemic than we were when netflix was, you know, shooting through the roof. Should, should they still be considered a growth stock here? Well, you know, I, I don't know the exactly how you would define growth stock, but maybe not. Maybe it's more like a more mature media company and you know, that would be a Disney or of icon or maybe one has to start looking at it a little bit differently than, than say, a pure technology startup or a growth stock. But I still think there's um, there's a ton of interesting developments, streaming is unquestionably the future of the entertainment industry access and, and, and I think there'll be a lot of adjustment, not just with netflix's, uh, teams, but with the studio system as well in terms of how pictures and and content gets released and where it gets released. So I think there's still a lot of adjustment going on, maybe not growth. One thing I thought was really interesting on Friday, you know, when Netflix shares were really down over like 19%. It sort of had this almost like cataclysmic domino effect where you saw Roku go down? Disney went down, all the media companies went down, why is that? Why did you see all the other media companies react negatively to netflix? Well, I think that's a huge observation and that goes to this point and what streaming is all about. So streaming is a business, particularly these new models. Now with netflix, you're not releasing these things sequentially, you know, our appointment television or going to movie theaters, you invest, people watch them, they burn off quickly and they got to redo it again basically. And these are, for the most part, netflix is a good example, but there's plenty of other streaming examples out there. I come from the music industry where there's even more extreme examples, these are standalone companies where if you're a consumer, you can quit pretty easily. And just, and just, you know, get off these are not old school media companies that have cable networks that are bundled into whether it's your direct tv package, your cable package and so the whole sector, I think it's fair to look at it and I think that's, that's what I see when I saw those rippling effects going throughout throughout the cable and media ecosystem as well. Okay, so Seth do you think then business executives from NBC to Disney, we'll reevaluate maybe how much money they're spending on streaming because of this? Almost like this year will sort of be this reckoning to be like if they're going to continue to invest, they keep doing it, but if it's not bringing in results, they have to change the streaming strategy here. There's no question that streaming is the future of our business, the entertainment business broadly. And so I think there will be ongoing reevaluation, not just on the investment side, I mean that's a very key piece of it, but I mean we see it here just operationally with, for example, with Disney what gets released and when, if it goes straight to theaters, if it goes straight to the streaming services, the way they're doing with all the Pixar titles now or if they test models that are sort of in between like what's called premium video on demand and I think all of that, including the investment considerations are going to get lumped in as well by the way, we didn't mention it, but talent because these aren't things that you can just make without talent in them. So there's a whole overall kind of ecosystem appraisal. I think that any studio executive would be doing to do this effectively. Yeah, good point Seth Shatner is the managing director at Strat America's Seth such a pleasure to have you here. Thanks so much for your insights