Is streaming services really a good business?

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Stock price netflix and Spotify
Stock price netflix and Spotify

No. Ok article finished time to open YouTube and watch cat videos.
Never mind you are a Dog person let’s discuss.

🤑 Margin matters.
When we Discuss streaming business two main players comes in mind Netflix and Spotify.
Spotify do not product any of its music ( well they did try to get into music making and podcast
but it isn’t going so fine ) it paid $7bn in royalties in 2021.As a result they only made $98 million
in operating income on revenue of $10.20 Billion. Which sucks ! On other hand Netflix owns its content
and their margin is better. But it is a hard job not every business can do that consistency every year.

Timing matters.
If you check the chart below. There is similarities between Netflix and Spotify stocks. Both were favored by investors
in early days when there was not much of competitions , but soon That favor faded and now they both are struggling to hold the lines.
Some how the idea of Streaming business seams less attractive to buyers.

Netflix and Spotify Stock price since 2019 till 2022

💸 Inflation Worries.
Last week my friend called me and asked me my Spotify password reason was simple he can save 10$ each month. Some others are
using free version as they do not mind advertisement. When cost cuts required first thing people considers is
monthly membership or subscription services which are not essential.

👊Rising Competition.
For Music services now one can choose between Spotify , YouTube Music , Apple , Amazon etc…etc.
For Movies one can choose between Netflix, Disney+ , Hulu , Apple TV , Amazon etc…etc..
Now you might say that There are billions of people and Cable TV business is dying so there is room for everyone .
No it is not. Recent numbers clearly shows these companies are reaching their limit of subscribers. So unless you change your business model you will not be growing.

📰 Final Thoughts.
My 2cents are on companies which goes beyond streaming , Netflix has 220 Million + subscribers That is huge number. just to give perspective Facebook ( sorry Meta ) makes like 33 USD per user in just advertisement revenue ! So even if Netflix provide all the content for free by only giving advertisement to users that will be 7.2 Billion ! which is 25% of what Netflix makes now.
Not suggesting this is the way but any innovative ways to use these subscriber base will be a key .

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