The largest streaming service provider in the world, Netflix (NFLX, Financial), is looking forward to expanding its wings in unknown territories and hopes to improve its global penetration level manifold in more international locations. The streaming giant has seen a drop in subscriber count in 2014, but the management remains optimistic for 2015 and is hoping to devise strategies to increase the level of annual subscriptions for the company. But there are headwinds which the company could face in its path of progress. Let’s dig deeper to find out what could possibly be Netflix’s future in 2015.
Looking at the subscriber growth rate
Netflix has already announced its expansion plans in Australia and New Zealand later this year with the mission of expanding in markets with potentially 100 million or more broadband households. As of September 30 of last year, the global streaming giant had 50.7 million paid subscribers worldwide. As the company unveiled changes in the pricing plan, it led to subscriptions suffering at the end of the day.
This in turn did hit the sentiments of the investors who got worried with the weak subscription number reported in the past quarter after which the stock has already taken a downturn and has dropped over 24% in the last three months.
However, as the company has recently announced its strategy to expand in the Oceania region this year, it has led to investors regaining their level of optimism on the company about the video-on-demand company’s subscription growth.
Analysts have opined that the company has enormous potential to grow organically and many do agree that the streaming company is a better pick among momentum stocks.
The company’s vice president, Todd Yellin, shared at the CES 2015 in Las Vegas, “We’re constantly looking at more countries. …You can expect more announcements later this year.” The company believes that the expansion plans can aid in improving the subscription for 2015.
Expansion could face some headwinds
According to predictions of research firm Strategy Analytics, Netflix would see a dramatic decline in subscriber growth as new internet video services from HBO and others hit the market in 2015. They believe that there could be drop in subscriptions up to 30% from what was seen in 2014.
The research team has commented that Netflix’s domestic streaming subscriber growth would dip to 11% from 19% reported in 2014 mainly due to growing market saturation and HBO’s entry into the over-the-top video market.
According to Fortune, Time Warner’s (TWX, Financial) HBO is expected to launch its stand-alone streaming video service by April this year which could serve as a headache to the largest streaming service provider Netflix.
There are also predictions that Apple (AAPL, Financial) and Google (GOOG, Financial) could also launch subscription video-on-demand services in 2015 that could immediately compete with Netflix’s strategies as they would want a share from Netflix’s current revenue stream.
Concluding thoughts
While Netflix is extending its territory to become a global brand, these headwinds stated above could pose as an immediate threat for the company’s future sales and could affect the top line of Netflix in the long run. However taking everything into account, analysts’ still see tremendous potential in Netflix stock, and it’s expected to escalate to nearly $500 by the end of 2015. Currently, all eyes are glued on January 20 when the company would release its earnings and that set of numbers would aid in deciphering the future of Netflix better for the coming days.
