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Netflix Stock Drops After CEO Acknowledges ‘Tough Competition’ Coming From Disney, Apple

Todd Spangler

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Netflix shares fell as much as 7% Friday to a nine-month low, coming after CEO Reed Hastings commented that the November launches of Disney Plus and Apple TV Plus will introduce a “whole new world” of competition.

Hastings, speaking at the Royal Television Society conference Friday in Cambridge, England, said, “While we’ve been competing with many people in the last decade, it’s a whole new world starting in November… between Apple launching and Disney launching, and of course Amazon’s ramping up.”

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The Netflix chief also cited NBCUniversal’s Peacock streaming service, slated to debut in April 2020. “It’ll be tough competition,” Hastings said. “Direct-to-consumer [customers] will have a lot of choice.”

Hastings also said new SVOD players would cause production costs to increase even more. “Someday ‘The Crown’ will look like a bargain,” he said, referencing the British royals series with a reported budget of over $100 million per season.

Netflix stock closed down 5.5% for the day, to $270.75 per share.

Hastings’ comments apparently unnerved investors, even though Netflix has previously said forthcoming subscription VOD services from Disney, Apple, WarnerMedia and NBCU would step up competitive intensity in the sector.

“The competition for winning consumers’ relaxation time is fierce for all companies and great for consumers,” the company told investors in July in its Q2 earnings letter. At the same time, the company said in the U.S., customers spend only about 10% of their TV-viewing time on Netflix “and less of their mobile screen time, so we have much room for growth.”

Netflix’s stock drop also comes after Bernstein media analyst Todd Juenger on Thursday published a note saying the streamer’s shares could drop 20% based on investor perceptions that Disney Plus and Apple TV Plus — priced well under Netflix’s standard $12.99 monthly two-stream plan but with considerably less content — would steal share. But he predicted Netflix’s stock would rebound, setting a $450-per-share 12-month price target.

“We do not believe the launch of additional SVOD services will cause existing Netflix subs to cancel, or future Netflix subs to not materialize,” Juenger wrote, reiterating an “outperform” rating on the stock. He argued that the expectation new entrants will take market share from Netflix rests on an unfounded assumption that the services will compete with each other “for a fixed number of potential subscribers.”

Apple TV Plus is scheduled to launch Nov. 1 in over 100 countries and regions, priced at $4.99 per month — and free for 12 months with the purchase of a new Apple device. Apple is premiering nine original shows on Apple TV Plus when the service launches, including “The Morning Show,” a drama starring and executive produced by Reese Witherspoon and Jennifer Aniston, and starring Steve Carell.

Then on Nov. 12, Disney Plus — which will cost $6.99 per month in the U.S. — is set to debut in the States, Canada and the Netherlands, marking the first time movies and shows from Disney, Pixar, Marvel, Star Wars, and National Geographic will be together in one streaming service, along with a slate of originals. Disney also has unwound it licensing deal with Netflix for the U.S. and Canada, starting with new film releases in 2019.

In the first year of launch, Disney Plus will include 7,500 episodes of current and past TV shows and 500 movies, according to Disney. Also in Year One, it’s set to debut more than 25 original shows, including Jon Favreau’s live-action Star Wars series “The Mandalorian,” and 10 original films and documentaries.

Even before the new SVOD services launch, Netflix’s stock was battered after it badly undershot subscriber forecasts for the second quarter of 2019, posting its first net U.S. customer decline since 2011 while growth slowed considerably overseas. The company added 2.7 million subs worldwide, almost half as many as the 5 million it had projected.

Netflix is scheduled to report Q3 2019 earnings on Oct. 16 after market close.

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