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Netflix Has Won the Streaming Wars. So What Comes Next?

Netflix reported another stellar earnings result, featuring its biggest quarterly profits in company history.

Photo of a Netflix building
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Netflix won the streaming wars, but the spoils aren’t entirely clear. 

Last week, the preeminent streamer reported another stellar earnings result, featuring its biggest quarterly profits in company history and a surprisingly strong subscriber gain. Now, as the dust settles, Wall Street can’t help but ask — and argue over — just exactly how high Netflix can fly.

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The numbers from last week’s earnings report are nothing to scoff at. Revenue increased 15% year-over-year to $9.8 billion, while net income increased a whopping 41% to reach $2.4 billion. Even the roughly 5 million subscriber gain, down from over 8 million in the same quarter a year ago, beat consensus expectations (the company claimed to have around 282 million subscribers overall at the end of the third quarter — good for a comfortable first place among streaming competitors). It was enough to propel the company’s share price to $763 by market close on Friday, an all-time high.

Commensurate with the company entering a new era as the unequivocal victor of the streaming wars comes a shift in how it reports its financials. Starting next year, Netflix will no longer include subscriber figures, focusing on revenue instead. That’s not to say subscriber growth doesn’t matter, according to at least some on Wall Street — but it is a sign that the company is exploring life after the streaming wars: 

  • In a note published earlier this month, which downgraded Netflix’s stock from “equal weight” to “underweight,” Barclays analyst Kannan Venkateshwar wrote, “Even if Netflix gets to its revenue goal, valuation implicitly prices in more than a doubling of sub base from [the] present level, which seems unrealistic.”
  • Not so, says Wedbush Securities analyst Michael Pachter, who told The Daily Upside that the company could live up to its premium valuation through sizeable, but not unreasonable, subscriber growth (of around 25%, he estimates) paired with increased revenue per user from a combination of both price increases and advertising — particularly from live events broadcasting.

Library Card: While Netflix’s future value might be murky, its past is prologue — and more valuable than ever. Demand for all the original TV content produced by Netflix over the past decade-plus, from “House of Cards” to “Love is Blind,” has now surpassed demand for the 80-year-old back catalog owned by NBCUniversal, now housed mostly on streamer Peacock, according to a Parrot Analytics report published last week. It’s the first time Netflix has passed a legacy media competitor in the key metric, Parrot Analytics said. In other words: Watch out, Paramount. You may be next.