Netflix And Spotify Are Navigating The Streaming Crisis With Their Crowns Intact

The collapse of The Walt Disney Company DIS stock and profitability shook the entertainment industry, and streaming was no exception. Moreover, we learned that Netflix NFLX remained king as far as streaming goes. What Netflix is in the streaming universe of movies and series, Spotify SPOT is in the music streaming galaxy. Despite challenges that are plaguing the industry, these two players managed to remain on their respective thrones.

Netflix Got A Kick Out Of Its First Mover Advantage

Netflix basically created its own throne as it went into streaming back in the 2010s and long before its industry peers. Netflix may not have the marquee content like Disney has, but its massive content library clearly is appealing to a vast population. Moreover, Netflix went on an overseas conquest, making significant effort to make foreign language content and produce it locally that was key for its international footprint that keeps on growing. With Europe, Mexico, South Korea and Brazil under its belt, Netflix became an unmatched global player. Although today, its shares fell 3% as its CFO Spencer Neumann showed Netflix is in no rush to boost margins, one must not forget that the streaming king already eased profitability concerns and is a rare entertainment player who reported sunny earnings despite a revenue miss, amid a cloudy Hollywood strikes climate. It also added 5.9 million users during the second quarter thanks to its password sharing crackdown. Yesterday, at the Bank of America investment conference, Neumann disappointed with a soft operating margins guidance between 18 and 20%, below the current consensus of 22.1% but as he noted, building an advertising business from scratch is by no means an easy task. But while Disney keeps on getting hit and losing subscribers, Netflix’s struggles are far less severe.

Spotify Showed To Be Somewhat Resistant To The Streaming Fatigue

Spotify did disappoint with revenue figures and guidance from its latest quarterly report. Its second quarter revenue rose 11% YoY to 3.18 billion euros which came short of Refinitiv’s consensus estimate of 3.21 billion euros. Spotify also made a loss of 1.55 euros per share.

Spotify also has scary global competitors, including Alphabet GOOGLGOOG, Amazon.com Inc AMZN and Apple Inc AAPL. However, nor Google nor Amazon nor Apple focus as much on music streaming which is Spotify’s entire universe. No one, including Apple, Amazon, Google and Spotify, is resistant to the streaming slowdown. 

But Spotify did manage to grow its monthly active users 27% to 551 million in its latest reported quarter with its paid subscribers count increasing 17% YoY to 220 million, both topping expectations and proving that Spotify is somewhat resistant to the streaming fatigue that has plagued the industry. 

Navigating Through Challenging Industry Times

One could conclude that it might be too late to catch up to these two players that are clearly dominating their fields and navigating challenging times for the streaming and entertainment industry. The fall of Disney shows that even size and legacy can’t protect a company from the industry-wide crisis, but Spotify and Netflix show that a first-mover’s advantage is not only a powerful weapon against scary competitors like Disney, Apple, Amazon and Google, but that it is also a life-saver during difficult times. In their own respective way, Netflix and Spotify certainly made the right niche commitments that are now cushioning them against industry-wide hits.

DISCLAIMER: This content is for informational purposes only. It is not intended as investing advice.