Analyst: Netflix to Weather Content Migration — For Now

With Netflix set to release second-quarter (ended June 30) financial results on July 17, Michael Pachter, analyst with Wedbush Securities in Los Angeles and longtime Netflix bear, contends the subscription streaming video pioneer will add 5.3 million subscribers, including 300,000 in the United States.

The tally surprisingly exceeds Wall Street consensus and Netflix’s projection of 5 million new subs, including 4.7 million international subs.

Pachter argues that despite media attention to the departures of popular TV reruns “Friends” and “The Office” from Netflix in two years, the service has more than enough content in the pipeline and willingness to spend big on new programming to weather the storm.

“Friends” and “The Office” account for an estimated 5% of all viewing on Netflix, leaving other content that accounts for 95% of viewing on Netflix in place.

Indeed, Netflix launched 21 new shows in Q2, excluding 13 returning series. That compared to six news series and 17 returning series in the previous-year period.

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At the same time, content from NBC Universal, Fox, Disney and Warner Bros. currently accounts for upwards of 65% of Netflix viewing hours, according to Wedbush.

Pachter expects the migration of third-party content away from Netflix to competing platforms to be relatively slow and is unclear whether the service can successfully replace it with quantity and quality to keep its subscribers loyal.

“We think it is likely that Netflix will pay whatever it takes to attract high quality content and believe its competitors will be slow to gain scale,” Pachter wrote in a note. “Thus, we expect the status quo to be largely maintained until the end of 2021. For now, Netflix provides tremendous value for its subscribers.”

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