Shares for the streaming giant Netflix fell 5 percent last week after Wells Fargo downgraded its stock due to worrying trends in user engagement.
The report, titled “Engagement Risk,” from Wells Fargo analyst Steven Cahall alleged that the streamer’s user engagement had fallen behind in the Nielsen Gauge, adding that the top 100 titles saw year-over-year slight decline.
“Engagement trends look worrying to us,” the report stated, per The Hollywood Reporter (THR). “TLDR: NFLX has lacked big original series & it’s showing.”
Wells Fargo speculated that the engagement drop may stem from Netflix attempting to compete with YouTube by investing in podcasts, gaming, and other forms of diverse content. To turn the trends around, the report said that Netflix will be making “tougher choices ahead.”
“Options incl a content spend reboot (takes time), licensing 3P content incl live sports (e.g. from FOXA, NBCU) and/or M&A…so a messier NFLX story,” the report said.
“Where we could be wrong: 1) Content spend is at record levels — NFLX has time & again delivered unexpected break-out hits; 2) The int’l slate is harder to forecast & could be potential upside to our hrs est; & 3) NFLX is great value so may still have pricing power/margins beyond our expectations,” it added.
The report comes after Netflix joined with Amazon and YouTube to form a D.C.-based lobbying group to counter scrutiny from lawmakers over the growing cost of streaming live sports.
Dubbed the Streaming Access and Choice Alliance (SACA), the group will aim to “promote high-quality and high-value entertainment experiences for consumers.” The group includes Amazon, Netflix, and YouTube, and will be led by the tech-industry trade group TechNet.
“The Streaming Access and Choice Alliance (SACA) was established to engage policymakers and highlight the many benefits that streaming services deliver to consumers,” the group says on its website.
“Amazon, YouTube, and Netflix — three companies at the forefront of delivering best-in-class consumer and product experiences via streaming — are founding members,” it adds. “SACA will provide the industry and consumers a voice in Washington, D.C., advocating for pro-competition policies that acknowledge the ever-evolving landscape and put consumers and their entertainment preferences first.”