Why Is Netflix in the FAANG?
Netflix is one of the biggest names in the streaming industry, but it is smaller than the other FAANG companies. Microsoft, for instance, is much bigger than Netflix. Despite this, Netflix is still a member of the FAANG. Why is this? Because it has more data, experience, and lower churn than its competitors.
Netflix is a streaming service with pricing power
Netflix is a streaming service with pricing power, but that power isn’t very strong. The company has limited media IP and a small audience that is increasingly migrating to other platforms. While it has $126 billion in market cap, it is rapidly losing its core appeal. The company never intended to become a universal streaming service, and it has relied on its price competitiveness to earn profits and eschewed other revenue channels. Despite the high market cap and large subscriber base, the result is a weak financial performance.
In fact, Netflix is experiencing its first decline in overall subscribers in 10 years. In response, the company has decided to offer a more affordable version of the service. While this is a step in the right direction, many investors are worried that this move could damage Netflix’s pricing power.
Netflix is also facing a downward trend in the number of new subscribers. It is expected to report lower subscriber growth in the second half of 2020. But this is not the end of the story for Netflix. The company is also facing a downward trend in subscriber growth, making it harder for the company to increase prices.
Netflix’s pricing power comes from its ability to offer more content than competitors. It has invested in Latin America, the U.S., and Canada and has also been investing in lower-cost offerings. Last month, Netflix lowered prices in India, reducing the price of the Basic plan by $2.60, the cost of mobile-only plans by $1, and the Standard plan by six dollars from $8.55. In India, Netflix has about 4.4 million subscribers. By comparison, the company boasts 74 million subscribers in the U.S. and Canada.
While Netflix has price flexibility, it is a company with limited resources. Netflix is still cheap compared to a traditional pay-TV subscription, which runs about $100 per month. But it could face resistance from consumers if it tries to raise prices further.
It has more data and experience than its competitors
Netflix has a much higher data and experience base than any of its competitors. This means it can use the data and experience to provide its subscribers with better suggestions and satisfy them. The company has 222 million subscribers worldwide, watching an average of 3.2 hours of content daily. The company estimates that it will be able to surpass 500 million subscribers in the coming years.
While the other three companies in the FAANG have diversified sources of revenue, Netflix relies primarily on paying streaming subscribers. For example, in the past two years, Disney added almost twice as many paying subscribers to its streaming service as Netflix. But this year, Netflix is facing heightened competition from key rivals and diminishing returns on capital expenditures.
It pays higher salaries than its competitors
If we look at the companies that pay their employees the most, we see Netflix among the top. It pays its developers higher salaries than its competitors and hires senior developers with several years of experience. However, the average salary of a Netflix employee is about the same as that of a developer at one of its competitors. While Netflix is in the same league as its competitors, it is unique in the sense that it focuses on a particular market and has dominated it.
Netflix is also known for its opinionated conception of talent. Most large tech companies share this attitude. For example, the company hires only senior engineers. It does not offer dream jobs but provides perks like office perks. As a result, its employees are well-compensated and are often at the top of their fields.
FAANG employees often have to work long hours and are required to be on call. This makes them highly sought-after by other tech companies. It also requires them to live in a city with high living costs. In addition, the employees need to be on call 24/7, as delays in prime shipping or issues with their app could result in millions of dollars in lost revenue.
While many tech companies pay a higher salary than their competitors, you should ensure that your salary is commensurate with the company’s needs. Many tech companies have unique compensation schemes that are highly competitive, and some may even be better than the salaries of the FAANG companies.
It has a lower churn rate than its competitors
Netflix has consistently had a lower churn rate than most of its competitors, including Hulu, Amazon Prime Video, and CBS All Access. In the last two years, Netflix’s churn rate has ranged from 2.3% to 2.4% compared to Hulu’s 4.1%. That’s good news for the streaming service because subscribers don’t have to worry about canceling their subscriptions. But the rate can fluctuate, and it’s important to know how to adjust your pricing.
The churn rate is an important indicator of the stickiness of a service. While many OTT competitors focus on acquiring new users, Netflix is focused on maintaining and increasing the retention of existing subscribers. By reducing churn, Netflix is able to retain its subscribers longer.
Netflix has a lower churn rate than most of its competitors, but it’s important to keep an eye on the competition. In March, the service’s churn rate jumped to 3.3%. This was a marked increase from the 2.2% recorded at the beginning of the year. However, churn was even lower in younger demographics, with millennials and Gen Z experiencing higher churn rates than baby boomers and Gen X.
Netflix is reducing the churn rate in the U.S., where it has consistently outperformed competitors over the past two years. Netflix has also been better at converting old subscribers and attracting new ones. As a result, its churn rate is 2.4% compared to 5.3% for the entire premium streaming market.
Netflix has the potential to keep growing at a higher rate. It has a long growth runway and should continue growing by more than 30 million subscribers a year. Netflix has also proven that it has the pricing power to increase prices in the future. This would increase the value of the customer and margins and generate meaningful free cash flow.
Another reason why Netflix has a lower churn than its competitors is that it has higher user engagement. A higher engagement rate means fewer unsubscribers. This is especially important for OTT providers that depend on large numbers of subscribers to stay in business. A lower churn rate means higher revenue per subscriber.