Bank: “Netflix a long-term winner”

Analysts at MoffettNathanson (MN) have inevitably admitted that the longer the current pandemic situation lasts, the bigger the benefit to Netflix, as both linear and OTT competitors will eventually be unable to debut new original content.

“In addition, given the looming negative impacts to advertising, movie theatre attendance and cord-cutting, traditional content owners will be forced to reduce their content spending into the future to preserve free cash, which should make Netflix a long-term winner,” said and MN report.

MN says that over the years the firm have happily debated the idea that Netflix can build a deep monopoly-like moat in worldwide content distribution akin to Google’s position in search or Amazon’s position in e-commerce. As such, MN thought that investors were over-estimating the free cash flow bounty that would accrue to Netflix when this cash-spending build-out was through.

“Yet, in hindsight, what Netflix has accomplished and what separates them from the competition is the sheer size of the investment spending tied to stable and recurring subscription revenue, which will now, due to this fetid environment, cause other companies to rethink their appetite or ability to play this game. As we have said before, the unwillingness of Peacock or HBO Max or even Hulu to aggressively build out outside the US is a singular gift to Netflix. The moat is their willingness to spend more than anyone else to deliver content to the home and now, given this crisis, that willingness should begin to generate meaningful long-term advantages as more cords get cut and other studios slow spend,” argues MN.

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Originally posted at Advanced Television
23rd April 2020