With the news of Netflix’s share price tumbling, is the streaming service looking to diversify? Are Netflix video games next on the agenda? Peter Garnry, head of equity strategy at Saxo Markets, certainly thinks so.
Why is the Netflix share price falling?
While revenue is up, Netflix’s new subscribers tally fell short of expectation in its latest quarterly results. The market was expecting around 6.25 million new accounts to be opened between January and March 2021. Netflix achieved just 3.98 million.
To add insult to injury, Netflix also forecast only one million new account openings for the next quarter of its financial year. When compared to the near-5 million predicted by analysts, this doesn’t look good.
As a result, Netflix’s share price fell 9% overnight.
Considering that most of us have spent lockdown binge-watching shows on Netflix, some may be surprised about the current results. However, the pandemic has meant that there is a dearth of new shows available, with production halting for many companies and movie studios in 2020.
So is time for Netflix to branch out into video games?
Will Netflix evolve into streaming video games?
Peter Garnry, head of equity strategy at Saxo Markets, has suggested that Netflix “probably should do video gaming streaming”. He claims that competition is not coming from video streaming, but in fact from the more addictive gaming arena.
While some of us love to just sit back and follow a storyline, this form of passive entertainment doesn’t work for everyone. Netflix itself has hinted that gaming is becoming a big part of entertainment. And as Netflix sees itself as a service for all types of entertainment, moving into streaming video games could be the next logical step.
As Peter says, “It would be a natural thing for them to do. They have the brand and global distribution, so that may be an interesting angle for Netflix.”
What does this mean for investors in the long term?
The obvious concern among investors is that new Netflix subscribers have ground to halt. This is usually the time when a company looks to grow in other areas in order to attract new users.
While video game streaming may well be one of the avenues that Netflix explores, this isn’t going to happen tomorrow. The important takeaway is that “Netflix is hinting here that they are acknowledging gaming is an important part of entertainment”.
In the near term, it is hard to say whether the Netflix share price will fall further. Netflix has a market cap close to $250 billion, so future expectations should be kept in check. The interesting thing for potential investors is that the streaming service is open to exploring its options and adapting to new verticals.
Where to go to buy shares?
If you are interested in investing in any type of share, then finding a trading platform that suits you could make all the difference. We have reviewed some of the top investing solutions around, including the Saxo Markets Share Dealing Account.
Remember that if you want to protect your investment returns from the taxman, then you could open a Stocks and Shares ISA. Here you can invest up to £20,000 (the 2021/2022 ISA allowance) tax free. That said, tax treatment depends on the specific circumstances of the individual and may be subject to change in the future
However, investing is not without risk. If you are interested in reading more about the ins and outs of investing, then check out our investing articles. We cover everything from how to evaluate a stock before buying it to topical events like football clubs’ share prices being rocked by the European Super League announcement.
