Below is a chart and brief excerpt from today's Early Look written by Communications analyst Andrew Freedman.
Whether you choose to believe it or not, Netflix (NFLX) is a hit-driven business. When Netflix releases tent pole series such as “Stranger Things” and “Money Heist” it brings in many new subscribers. While Netflix releases anywhere from 50-80 new original titles a quarter, it is only the top 10 that matter.
We have been keeping track of the production of Netflix’s most popular series in development. Lost in Space, The Witcher, Lucifer, Sex Education, You, Stranger Things… all delayed. And there are plenty more than just these.
Management brought up the issue in last quarter’s investor letter:
“Since our content production lead time is long, our 2020 plans for launching original shows and films continue to be largely intact. For 2021, based on our current plan, we expect the paused productions will lead to a more second half weighted content slate in terms of our big titles,”
For now, investors are ignoring the looming content gap despite the apparent warning signs. We think that will change as subscriber growth stalls out, and the company misses estimates.