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Should Netflix Worry About Losing US Market Share?

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Netflix’s (NFLX) and YouTube’s market share among US adult viewers could shrink, reported Variety on Monday, citing eMarketer data. However, the data showed that average daily viewing times could rise for both platforms.

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Netflix might lose US market share

Variety reports eMarketer estimates the streaming giant’s share of daily video time will peak at 27% this year before falling to 26.4% in 2020 and 25.7% in 2021. According to Variety, eMarketer predicts Netflix and YouTube will dominate the US viewing space, but streaming wars will significantly fragment the market. Variety reports eMarketer analyst Ross Benes said, “Even though Americans are spending more time watching Netflix, people’s attention will become more divided as new streamers emerge.”

And in July, eMarketer indicated that new entrants may not kill Netflix, but threaten its dominance, reported Forbes. According to Forbes, eMarketer estimates Netflix’s share of US OTT (over-the-top) subscriptions could slip from 87% this year to 86.3% in 2023. Furthermore, Forbes reported eMarketer analyst Eric Haggstrom said the market could get saturated, and it would get “more difficult for Netflix to grow its U.S. subscribers and the competition will put pricing pressure on Netflix.”

The same report estimated Netflix would have 158.8 million US viewers this year, while Amazon Video would have 96.5 million. It’s worth noting that viewer count is not the same as subscriber count. Several members of a family can view a show through one subscriber account.

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US market already saturated

The streaming wars have overwhelmed US consumers to the point of saturating the market. A November survey by PCMag illustrates this well. Of 1,001 US respondents, 75% said that they weren’t interested in any streaming services.

Slowing US market growth has been a concern for quite some time. Back in June, PricewaterhouseCoopers estimated that the US market’s subscription-video-on-demand YoY (year-over-year) revenue growth would plunge from 19.1% in 2018 to 9.7% in 2023, reported Variety.

International growth could offset shrinking US share

However, in my opinion, Netflix’s declining US market share may not trouble the company in the long run. The company knows that the real growth opportunity lies in international markets. Of Netflix’s total subscribers, 62% are overseas. Although Netflix’s domestic subscriber growth missed expectations in Q3, its international subscriber growth was encouraging. The company’s US subscriber growth outlook is conservative.

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Netflix has spread its footprint extensively in Asia, especially India, Malaysia, and South Korea. In India, the streaming giant’s revenue grew 700% YoY in fiscal 2019. Even in Latin America, such as Mexico and Brazil, the company is making significant moves. In a podcast, NPR reported that the streaming giant would spend $200 million on local production in Mexico next year. In October, eMarketer estimated that Latin American viewership would surge to 70.1 million users this year, and 88.2 million by 2023.

Netflix also considers Turkey a promising market for subscriber growth. Presently, the company has 1.5 million paid customers in Turkey, but it wants to expand. According to Reuters, in September, the streaming giant applied for a license in Turkey to meet the country’s new broadcasting standards.

The US remains a crucial market for Netflix, however its growth hinges on international expansion. Last month, Investor’s Business Daily wrote that Netflix bear Citron Research had “turned positive on Netflix stock, saying international growth could take the internet television network’s share price back to 350.”

The company’s US market share is shrinking due to competition. To survive the streaming wars and continue prospering, Netflix must focus on strengthening its overseas position. The international market has plenty of growth opportunities, but it also has regional competitors. Only by strategizing well and investing in quality content globally can Netflix counterbalance its shrinking US market share.

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