Is Netflix, Inc. (NASDAQ: NFLX) Business Model At Risk Of Being Disrupted?

December 26, 2017, 07:10 am ET, BY Simon M.- Contributor| Editor: Thomas H. Kee Jr. (Follow on LinkedIn)

Netflix, Inc. (NASDAQ: NFLX) is regarded by most investors, analysts and consumers as a disruptor company with a unique business model, which disrupted the traditional movie and television industry. Before the debut of Netflix in August 1997, most Americans had to rely on physical movie rental shops whenever they needed to enjoy a movie at home, but all this changed when Netflix launched its video streaming services in 2007.

Article Summary

Netflix has been known as a disruptor company ever since it was launched.

The company is facing significant risks that threaten its position as a disruptor.

As the risks materialize, Netflix’s business model could be disrupted.

Here’s the trading report on NFLX.

However, the company is facing some major headwinds that put it at risk of being dethroned from its position as a disruptor company. These headwinds include the fact that the Walt Disney Co (NYSE: DIS) recently announced that it would launch its own streaming service for most of its original content as well as streaming of sports events.

It seems that most investors are not worried about the impact of Disney launching its own streaming service despite the fact that this means the company will withdraw most of its popular franchises from Netflix. Some of the franchises that will be pulled from Netflix include the Marvel and Star Wars franchises, which have a huge following. Disney is a major threat to Netflix given that it intends to price its streaming service much lower than Netflix’s service.

Disney is also keen on acquiring many of the assets of Twenty-First Century Fox Inc (NASDAQ: FOX), which also has significant content streaming on Netflix. If the acquisition is successful, Disney is likely to pull most of Twenty-First Century Fox’s studios content from Netflix, which is a major threat to Netflix’s position as an industry leader.

Another major headwind that might affect Netflix’s streaming service is the repeal of net neutrality, which could allow internet service providers to limit speeds on certain websites. The repeal of net neutrality could negatively affect Netflix given that ISP’s such as Comcast Corporation (NASDAQ: CMCSA) could have significant power over the access to certain websites by consumers.

These two risks are likely to materialize soon and could affect Netflix’s status as a disruptor company in the streaming services industry. The two risks could actually disrupt Netflix turning it from a disruptor company to a disrupted company, which could negatively affect the company’s stock price.

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