Netflix, once a high-flying stock, is down 12% so far this year after the streamer’s guidance for the second quarter indicated dampened growth prospects.
But analyst Ben Swinburne of Morgan Stanley recommends the stock and said U.S. cable operators could give Netflix a boost it needs in a maturing TV market.
Swinburne said in a report that both Charter and Comcast—representing 40 million subscribers—“could be willing partners with Netflix in the near term or medium term.”
Traditional cable subscribers are older than the average Netflix subscriber, but they watch a lot more TV. And they’re less familiar with the programming Netflix offers, Swinburne said.
“Cable operators—increasingly more (internet service providers) than (multichannel video programming distributors)—have growing reasons to bring Netflix into the tent,” Swinburne said. “While they may lose some pay-per-view revenue (already declining for many MVPDs), operators could pick up leverage over programmers on content costs as a result of providing their customers with Netflix. We would expect Netflix to give up some economics, similar to other distribution partners like Apple or TiVo, but we do not believe it would meaningfully alter the direction of Netflix profits over time.”
And while the market has questions about Netflix’s ability to grow in international markets, Swinburne is optimistic. “Proven success in the U.S. and initial international markets provides a road map to success in new markets, and scale should allow Netflix to leverage content investments and drive margins,” Swinburne said.
Jon has been business editor of Broadcasting+Cable since 2010. He focuses on revenue-generating activities, including advertising and distribution, as well as executive intrigue and merger and acquisition activity. Just about any story is fair game, if a dollar sign can make its way into the article. Before B+C, Jon covered the industry for TVWeek, Cable World, Electronic Media, Advertising Age and The New York Post. A native New Yorker, Jon is hiding in plain sight in the suburbs of Chicago.
The smarter way to stay on top of broadcasting and cable industry. Sign up below.
Thank you for signing up to Broadcasting & Cable. You will receive a verification email shortly.
There was a problem. Please refresh the page and try again.