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Netflix’s Subscriber Focus Shift and Q4 Forecast
As the streaming landscape continues to evolve, Netflix is making a strategic shift in its reporting metrics. The company will be ceasing the public disclosure of subscriber numbers after the current quarter, opting instead to emphasize revenue, operating margin, and audience engagement metrics. This decision, announced by Netflix, signals a move away from solely focusing on subscriber growth and towards a more holistic view of its business performance. Morningpicker believes this shift reflects Netflix’s confidence in its current subscriber base and its focus on maximizing profitability in the face of increased competition.
Wall Street analysts are anticipating a strong performance from Netflix in the fourth quarter of 2023, driven by several high-profile releases. The consensus forecast predicts the addition of 8.2 million subscribers, bringing the total subscriber count to 290.9 million. However, this figure is subject to upward revisions as analysts recognize the company’s momentum at the end of December. A survey conducted by Guggenheim Securities of 45 buy-side analysts revealed that 70% expect at least 11.1 million net adds in the quarter, with 29% projecting a figure exceeding 13.1 million.
Tim Nollen of Macquarie believes the timing of this subscriber disclosure end is not coincidental. In a note to clients, he stated, “It is possible subscription growth will slow from here as paid sharing enforcement has largely cycled through, but a slowing rate of sub growth does not necessarily mean slower growth for the company overall.” Nollen anticipates Netflix adding more than 10 million subscribers in the quarter, with a “decent chance” of exceeding that number. This positive outlook has led him to raise his 12-month price target on Netflix shares to $965, from $795.
Disney’s Multi-Pronged Approach in 2025
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The Walt Disney Company, a titan in the entertainment industry, is approaching 2025 with a multifaceted strategy. Its operations span three key segments: Entertainment, Sports, and Experiences. Disney leverages its vast portfolio of brands, including ABC, Disney, Freeform, FX, Fox, National Geographic, and Star, to produce and distribute film and television content across various platforms.
Disney’s direct-to-consumer streaming services, Disney+, Disney+ Hotstar, Hulu, and Star+, are central to its growth strategy. The company is aggressively expanding its streaming presence, investing heavily in original content and acquiring valuable intellectual property. Disney’s theme parks and resorts, including Walt Disney World Resort, Disneyland Resort, and international locations, continue to be a major source of revenue and brand recognition.
Beyond streaming and theme parks, Disney’s vast portfolio includes sports-related entertainment services through ESPN, theatrical, home entertainment, and music distribution services, licensing agreements for merchandise and intellectual property, and a direct-to-home satellite distribution platform.
Evaluating the Streaming Titans for 2025
As both Netflix and Disney navigate the dynamic streaming landscape, Morningpicker believes investors should consider several key factors when evaluating their prospects for 2025:
Content Strategy
- Netflix’s focus on original content, including high-budget productions and international fare, has been a major driver of its subscriber growth. Morningpicker believes Netflix will continue to invest heavily in original content to maintain its competitive edge.
- Disney, with its deep library of beloved characters and franchises, is leveraging its vast intellectual property to create compelling streaming content. Morningpicker anticipates Disney’s strategy of combining its own originals with established franchises will continue to resonate with audiences.
Subscriber Growth and Retention
While Netflix is shifting its focus away from subscriber numbers, the rate of subscriber growth and retention will continue to be a key indicator of its success. Morningpicker will be closely monitoring Netflix’s performance in these areas, particularly in light of increased competition.
Disney, with its family-friendly content and strong brand recognition, is well-positioned to attract and retain subscribers. Morningpicker believes Disney’s focus on expanding its global footprint through Disney+ Hotstar will be crucial to its subscriber growth in 2025.
Financial Performance
Morningpicker will be analyzing both Netflix and Disney’s financial performance, including revenue growth, operating margins, and profitability. As the streaming market matures, profitability will become increasingly important for both companies.
Competition
The streaming landscape is becoming increasingly crowded, with traditional media giants, tech companies, and niche players all vying for market share. Morningpicker will be assessing how Netflix and Disney are positioned to compete in this rapidly evolving environment.
Conclusion
Ultimately, the streaming landscape in 2025 will be a dynamic battleground where both Disney and Netflix are vying for dominance. While Netflix boasts a vast library and global reach, Disney’s vast IP portfolio and strategic acquisitions give it a unique advantage in attracting and retaining subscribers. The key differentiator may come down to content strategy and price. Netflix’s continued commitment to original programming, coupled with its focus on affordable subscription tiers, might prove crucial in a market increasingly saturated with streaming options. However, Disney’s ability to leverage its beloved franchises and family-friendly content could solidify its position as a household name. The choice between Disney and Netflix isn’t just about choosing a streaming service; it’s about investing in the future of entertainment. Both companies are shaping the way we consume media, driving innovation and influencing the global entertainment industry. For investors, understanding the strengths and weaknesses of each platform is crucial in navigating this exciting, yet volatile, market. As the lines between traditional media and streaming continue to blur, one thing is certain: the battle for streaming supremacy will continue to captivate and shape the industry for years to come. Will it be the Mouse or the Red N that reigns supreme? Only time will tell.