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Streaming Wars: Netflix's Is A Mature Company & The Bubble Isn't Popping

Updated: Apr 7, 2022

By: Thoughts of a Random Citizen Podcast

All right, welcome back to another episode of Thoughts of a Random Citizen. I was going to release an interview this week, but I had planned on doing a market analysis in the upcoming future considering it's a new year and I always like to do those. I also wanted to redo one of my earlier episodes where I talked about Disney and Netflix. After the week we just had, I thought it was a perfect opportunity to mesh and do both. That being said, it is just me today. I'd like to dive into some unique facts that should hopefully make you ponder globalization and really just the world we live in in general a bit differently, but differently in a good way.

Today specifically, I wanted to dive into a larger world view of growth for the streaming industry. I’ll highlight Netflix, which has been in the headlines for all the wrong reasons last week, and then tie that into the larger market and how it's been behaving and hopefully give some insight as to what I'd recommend moving forward. Again, it's an interesting take on an industry that you probably wouldn't consider. Lastly, if you were interested in the previous episode I did about Disney and Netflix, it's a short, brief episode, but it's Episode 10, one of my earlier episodes. Enjoy that. I'll link it in the show notes if you're interested. That being said, enjoy the episode.

Streaming wars with Hulu, netflix, disney, apple tv, prime video, hbo

Today, I wanted to focus on subscription growth for Netflix. They have, at the moment, around 222 million subscribers. They have recently just said they expect slow growth, but have prior claimed numbers that just aren't logical when you're looking at it from a larger perspective. Netflix is obviously a cutting-edge company, or it was, considering at this point, everyone in the filmmaking industry has a streaming platform after COVID year one. By COVID year one, maybe we can start a new date system where instead of 2021, it's like one..[awkward laughter] that’s probably not real. Anyways.

What does that mean for subscriber growth not only for the industry, but for Netflix specifically? As I just said, Netflix has 222 million subscribers as of the most recent report they've released yet. If we look at the world, let's see how much growth they can realistically see. The global population is just under 8 billion people. So 222 million, it seems like it's got some room to run, no? Let's take a different perspective and a different viewpoint of that.

Of those 8 billion people, or just under, 7.8 or 7.9 billion, we have 3 billion of those people who have never even used the internet. Unless Netflix wants to get in the infrastructure building game, we can realistically say that Netflix has about 4 to 4.5 billion people that they can target for actual growth. I say that because we already have 220 million, and it's not quite a billion so that's how that works out. Of those 4 billion people, we have the wonderful, and clearly the people who should be the new leaders of the world, because they're so open, free and fair, honest, and kind, China, the government blows, not the people.

I just stopped my thought there, but who don't even allow Netflix to operate there. China doesn't have Netflix. They have about 1.44 billion people, but with North Korea and Syria, who are also just amazing role models for how society should operate and don't allow Netflix, I guess not so much Syria, because that's a different ballgame, but anyways, without getting political here, we're just going to round it off to about 1.5 billion that aren't reachable because most likely, China is not going to allow Netflix anytime soon, if we've seen anything that they're trying to do. That leaves us with about 2.5 billion people.

Of those 2.5 billion people, 1.35 billion speak English, which is the most commonly spoken language in the world, if you didn't know that. You hear it's the language of business, but I didn't actually know it's the most spoken in the world. A cool fact. Now Netflix is actively trying to reach out with original content to an entire 2.5 billion audience, but that means less attention and consistent content for those not speaking the other languages. What I mean by this is after English, you have Mandarin or Chinese with 1.1 billion people, although that's obviously not an option for them, considering it's banned. Then you have Hindu with 600 million, Spanish with 550 million, and then a bunch of others going from 275 million down,which if you consider how much 275 million is for the next most spoken language after Spanish, being more than their current subscriber numbers, you'd think, "Oh, that's good," but I'll explain in a moment why that is still difficult for the way that they produce content.

You could make Hindu a priority, although some of the 3 billion who have never used the internet might fall into that category. Then Spanish with 550 million people is also a good target to shoot for, which is really what they're doing, but then remember that of those 550 million who speak that in South and Latin America, a lot of those people definitely fall under that category of never having used the internet.

I know that because I actually have an interview coming up in a few weeks that's really good and it's about Latin America, and what somebody is doing down there. I'll keep you in tuned for that. However, you then have the rest of the lot, which like I just said, is a bunch of different countries that are about the size, individually, of Netflix's subscriber numbers currently, but let's explain why that is potentially an issue.

One thing we know about streaming is that you can run through a lot of titles on the service rather quickly and be left only to want more, which means that unless Netflix can devote a bunch of attention to those other languages as well, everyone will be left wanting more because as I last checked, I hardly want to watch anything on there now, because I've watched a few things that I am interested in, and yes, that is just my opinion. However, it's just a reminder that it is extremely difficult for filmmakers to produce consistent content for everyone's liking consistently.

Let's also remember that of the very discrepant demographic of 2.5 billion people, that doesn't mean they all want to sit down and watch Netflix with their life. I know we're all brainwashed to believe that that's all you do with your life. Brainwash might not be the right term, but a lot of people out there either don't have time or actively choose to spend it elsewhere. For the rest of them, there might actually be a lot, especially in those South American and Latin American countries, or Hindu speaking people over there in India, in the Middle East, a lot of them might not be able to afford a monthly subscription, especially when you look at the places Netflix is trying to expand to beyond that of the US and the English speaking countries, which I just referred to.

Lastly, let's not forget that of the 222 million subscribers, anywhere from about 25% to 35% of Netflix watchers don't pay. Hell, I'm one of them and I'll be honest, I hardly ever watch Netflix. If I were to have to pay to watch it, and actually have my own account, I wouldn't do it, I just wouldn't, because it's not that important to me, but I haven't watched it in probably two months, but that's furthering my point.

You can calculate those numbers all you want. What I'm saying is Netflix is a mature company. They are not a growth company and the pandemic was an exception of growth to what I think is a borderline saturated market with Disney plus, Apple TV, Amazon Prime, Paramount plus, and so many others already there or coming soon. Realizing all of this, Netflix has decided to focus its attention abroad, but as I just explained, I personally don't see how that's a viable solution to continue or sustain their current growth rate.

Speaking of Disney, let's shift our focus to Disney for a moment. I love Disney. I own Disney, disclaimer. I'm a huge Marvel fan and probably an even bigger Star Wars nerd. I grew up with the Disney Channel and Pixar as did most of the world. I'm clearly biased to an extent. Although I used to love Netflix, but I just don't have as much time anymore, but most of the world is what I'd like to focus on very briefly, the whole aspect of other languages around the world.

Where Netflix struggles to create original content, meaning not just voicing over a Marvel movie or Star Wars movie and I used Disney things there for example, but not just voicing over, what is it, Queen's Gambit, I think that's one, or all of the other Netflix originals that I can't think of right now, Disney has a massively successful catalog of Pixar and Disney Cartoon animation films that are original for every country in the world. That means that Lion King, Toy Story-- Actually, I'm just going to stop there because this list would be way too long.

It means that all of the movies that Disney has created can be in every language in the country with one original content creation. It's not just actors that you have to voice over, it's freaking Hercules and Aladdin, or you can just hire a famous celebrity of that country and have them do the voice over and because it's animated, it's 100% original in the eyes of the viewer. For another example, it's essentially saying that Netflix, in order to make an original Queen's Gambit in Italian, for example, would have to refilm or have all the actors speak Italian from scratch for it to be that original, these are people speaking my language kind of content.

Animation doesn't have to do that. That's what I'm trying to get at. In the eyes of the beholder, that goes a long way to see original content because while this is again an opinion, I don't like watching voiced-over movies. They're just not as gripping. That is the advantage I see moving forward. Regarding gaming, cool. Try it. See how it goes. Continue to be leading edge for Netflix because that's what got you to where you're at. I like Disney because they're a parks, a cruise and a brand products business.

After we get all of this authoritarian pandemic out of the way, that's a business you're going to want to own, especially when they start talking about implementing the metaverse into their theme parks, something that they can run wild with, because remember, Disney was a multi-billion dollar corporation long before Disney plus. To conclude the Netflix Disney portion of this, I believe Netflix should focus on becoming more theater-centric focused because I know that everyone called it the death of movie theaters.

Honestly, when you make a good film and your subscribers don't go up, so you don't really see a bump in revenue for that great film minus the potential of a few subscribers, I guess, you're missing out on the potential $260 million opening weekend Spiderman just had. That's three days, $260 million. Obviously, that's an extreme example because they're a record-breaking performance, but I think you understand what I'm trying to get at. As for cruises and movie theaters dying, I just don't see that happening. It's vacations, it's fun, t's unique, it's an experience.

Moving on to the market as a whole. I just wanted to give a quick perspective and advice on what I think you should be doing when Wall Street and the market take Netflix from a $600 stock in 200 to 300s within a month because of this realization of an absurd valuation that not only Netflix had, but a lot of other market-leading companies had. A lot of the market was overvalued, but this huge pullback has really just been driven by a few stocks. It's really just been the likes of Tesla, Amazon, Netflix, and a few others who have been propelling the market to these insane valuations in the first place. The overvaluation in this market is being rectified and all the money is rebalancing post-pandemic, pre-tightening.

If you're an average individual who has more than six months to two years of cash on hand, and that completely depends on what you should be doing and a number of other factors, then you should really be considering putting any extra cash after that into investments. I'm not telling you what to invest in. Crypto looks nice. The stock market is looking nicer all around, but this isn't a moment to be scared, especially if you have a job and you make a paycheck. Continue making those paychecks and investing. If you're a good investor, you get excited when pullbacks happen, like they are right now. If you're considering investing, these are the times when you should really think about getting started. Unless you don't make a paycheck, in which case this is probably not the best advice for you.

What you should never do is just keep your money in a bank account. I'm assuming everyone knows that, but I've been surprised in the past. The average American has $5,000 in savings. In Australia, it's about the same if you account for the difference in value of the dollars. If you have a paycheck every month, there's almost no excuse as to why you can't throw a certain amount of money into an account that you never have to think about again, meaning investments, then only look at it when you want to brighten your day.

People always say spend less than you make, which is obvious. Don't be Stephen Strange, but if you have a spending problem or really like to indulge yourself, you've figured out that you are good at spending all you have paycheck to paycheck, which actually means you know how to manage your money. You know how much you have to spend from the last paycheck until your next paycheck. That is financial discipline.

Idea time. When you get your next paycheck, put a 100, 500, whatever you want, in an investment, and then do as you always do, manage your spending until the next paycheck, then repeat. It's called discipline. There is no try, only do. I'll finish with the Marvel and Star Wars quotes. Point is, be smart and don't worry about the news outlets saying that there's a crash. There's not. Their job is to get more clicks and viewership. While you might think that that's my job as well, which it kind of is, I do this to educate as best as possible.

I have an ethical aspect of my business that allows me to not have to answer to a corporate board demanding higher profits. I do this just because I want to help out anyone who's willing to listen and possibly entertain you, but the Fed won't allow the market to crash. We've seen that time and time again. Since 2008 it isn't an option. If I'm being honest, I think that if anything were to happen, they would prefer hyperinflation over a depression-like crash.

If a depression-like crash happened or hyperinflation happened, which it's the Fed's job to ensure neither of those do, well, society as we know it would kind of collapse and break down to an extent that your savings account's not going to matter, the amount of money you have isn't going to matter, the amount of investments you have isn't going to matter. It doesn't really matter unless you're a multimillionaire or a billionaire, in which case you're good all the time.

The point is, though, that while it is good to be knowledgeable in those aspects, and I do have episodes about specifically potential hyperinflation and in-depth analysis of the Fed and ways to prepare yourself for those possible scenarios, which I'll post in the show notes if you're interested in that, it's not good to dwell on that mindset for a prolonged period of time. For this episode, we're not going to.

If I were you, and this is exactly what I'm doing, look at the opportunity to buy the dips, not on investments like Netflix, but potentially on crypto, which just went on a 50% discount two months ago. You can say what you want about crypto but the government seems to have no interest in banning it and it's a multi-trillion dollar global asset class that has game-changing and opportunity-providing technology, opportunities for those not given to the same opportunities by traditional finance, and opportunities like Amazon, who's not facing any of the problems regarding globalization that Netflix is.

While Netflix is a company that is realizing the difficult road ahead, the drawback doesn't mean that globalization is at an end, not by a long shot. Just like I said, companies like Amazon have an extremely bright future. If this pullback continues any further, keep your radar focused on those things. Crypto, companies like Amazon who are actually benefiting from globalization and have the systems in place to continue their growth rate. I could get into Amazon video, which I won't because that's an entire other episode in and of itself, and we're not talking about Amazon in this episode.

The reason I do keep bringing up Amazon is specifically just because they've had a massive pullback as well. I think that Amazon will continue to sustain its growth and is a potential good investment from a pullback unlike Netflix. That's the only reason, besides crypto, which I think is an amazing investment, I keep mentioning Amazon. I'll leave you guys with this.

People say volatility is bad. If you don't have six months' to two years' cash, it can absolutely be bad because you'll invest your money and it could potentially decrease 20% to 40%, which is what volatility is and then you need to liquidate your position solely because you didn't have enough cash on hand and now you need to withdraw from your investment, which you shouldn't have made unless you had enough cash on your hands. Then you've just lost 20 to 40% of your money, unless you have a paycheck and then you're all right.

I digress. Volatility, however, is a sign that there's a lot of interest in something that is probably going to be beneficial in the future. It's not bad. If you use patience and remember that when investing this year, because there will be a lot of volatility, then you'll find the success. Also remember that just because there's a pullback, it doesn't mean everything's crashing and going to hell. It means that the overweighted indexes that are overweighted in overvalued companies are becoming more realistic and there's always much more potential in the market if you find it.

Use this opportunity in this pullback to start or continue investing and create some peace of mind in your life. Create financial discipline just slightly with your life and you'll find a little bit more happiness. Honestly, I can say that with 100% certainty. If you get too involved you might find some stress as well, but if you just-- peace of mind, the strategy that I said earlier, put a tiny bit away, don't ever think about it, and continue making your paychecks, you will find a bit more happiness I promise you.

Speaking of peace of mind, or just engaging your mind, next week I will be releasing the interview that I actually planned this week with Dr. Betty Kovacs, where we dive into a fascinating conversation about the history of humans, what we're capable of, why, what, and how we're learning, and a bit more about our past. It's a really exciting conversation. I know I made it super vague there, but it'll be cleared up next week.

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