Hold Netflix

A long standing and very good client of ours wrote to me yesterday, asking "Is it time to sell Netflix?" My answer was no! I'm also a Netflix shareholder, and I'm buying at current levels.

Netflix stock had been drifting. It really got beaten up in July when it released disappointing second quarter earnings, showing it lost more than 100 000 subscribers in the US (it was expected to gain over 300 000). It took another leg down when they announced a deal to buy the rights to "Seinfeld". Who watches that old stuff?

The big picture here is that investors are worried about the streaming wars that are heating up. Netflix CEO Reed Hastings warned that production costs, which have already been significant, are going to climb even higher with the increased competition. Disney+ and AppleTV+ will be available for $6.99 and $4.99 a month respectively, undercutting Netflix's $8.99 (and more for family users) price point.

"While we've been competing with many people in the last decade, it's a whole new world starting in November," Hastings said in a recent interview. "It'll be tough competition. Direct-to-consumer [customers] will have a lot of choice."

So why am I not concerned? Increased competition may not be that harmful to Netflix. In a survey I saw from data analysis company Civic Science, only 2% of respondents said they would ditch their Netflix subscription for Disney+, Hulu or ESPN+, while 33% said they would keep Netflix and not subscribe to the others.

More broadly, as I said recently in another daily message contribution: productivity is rising to the extent that humanity will soon switch to a four day work week, and we will spend all of our time hiking, watching Netflix and interacting on social media.

I just think that the demand for content is going to be huge! These services are all going to do well, and they are so cheap, the prices will rise.