Netflix is poised to benefit as its rivals sell content to raise cash, according to analyst Michael Nathanson of MoffettNathanson.
While Netflix’s original programming receives significant attention, acquired content still constitutes a substantial portion of viewing among its subscribers. However, the supply of acquired content had dwindled as media companies focused on developing their own streaming services. But now, struggling media companies are selling content to Netflix and other platforms to generate revenue.
Nathanson observes that the pressure on Netflix’s competitors to sell more quality content will only intensify due to mounting debt and diminishing cash flows. Notably, Warner Bros. Discovery recently sold series including Insecure, Six Feed Under and Band of Brothers to Netflix. Nathanson highlights the decline in the value of many library titles due to a combination of tighter budgets at streamers and a greater supply of goods for sale.
Nonetheless, this situation presents an advantageous opportunity for Netflix. “Netflix started off its streaming journey buying the best content for next to nothing. It may soon be able to do so again, strengthening its hand,” he said.
Analyzing Nielsen data, Nathanson reveals that acquired film and TV content still accounts for over half of Netflix’s total viewing time in the United States. While original content drives fluctuations and growth for Netflix, the overall hours spent viewing has increased in the past two years.
Based on his analysis, Nathanson suggests that The Walt Disney Co. should combine its Disney Plus and Hulu streaming services. He advises Disney to continue delivering popular content on Disney Plus, allow others to shoulder the risk of producing original content on Hulu, and use sports content through ESPN Plus to drive consistent viewership and loyalty.
