Text by Pyr Marcondes, Senior Partner at Pipeline Capital Tech.
The reminder and pay attention comes from Bloomberg. Investors are very uneasy about the performance of some of the most important streaming services in the industry, among them the pioneer, still leader and emblematic Netflix. For the first time in a decade, the company lost 2 million subscribers in the quarter updated last week.
The week continued with equally relevant shocks from the loss of followers by Discovery and Roku. And CNN+ shut down operations just weeks after its debut.
This is a market that will remain subject to this type of shuddering and rearrangement among players. Are many. They are strong and full of money. Each entertainment and/or media operation has its own streaming services and, by all indications, there is no healthy space for everyone’s profitability.
It is not possible to imagine a sector of the economy, whatever it may be, that continues with the recurrent growth rates that the OTT world has been (and, in a way, still is) registering in years, since its first debut (inception say in English… I like that word… inception).
Because since its inception, the sector has only seen two things happen simultaneously: growth in the number of players and the number of subscribers. The pandemic accelerated adherence and audience, the businesses and actions of these companies had their values appreciated promisingly. But it is not possible to sustain this picture for years and years on end. Some players will fall by the wayside. Investors who bet wrong will lose money. The audience will samba from here to there and from there to here, to the taste of news and releases (investing in the production of new titles drains a huge part of the profitability of this industry into an endless drain), competitive advantages ranging from unpublished and proprietary titles to financial advantages in subscription plans. But the struggle for price in subscription plans is also an endless drain and leads to a loss of margin that ruins the business. We saw this happen with the phone company. Most operators today have serious profitability problems for this reason, among others.
The investment market is obviously very sensitive to all of this.
Mega-investor and billionaire Bill Ackman withdrew his investments in Netflix last week because he lost more than $430 million in three months. Netflix was the worst stock among those listed on the S&P 500. With this performance, it is to be expected that other investors will follow suit.
Anyway, we will experience great emotions in investments in the streaming industry from now on. Exactly what this same industry promises with its contents for all of us.