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FIRST LOSS in a decade
Last week, Netflix released its 2022 first-quarter results, stating a loss in subscribers for the first time in a decade. The markets responded harshly, with the gigantic streamer losing about 40% in valuation in one day.
Analysts address the loss of customers for virtually two reasons.
On the one hand, the increasing competition. Above all, Disney+ is increasing in market share, counting on a catalog of in-house created masterpieces. In addition, analysts predict there is more to come in terms of competition, with Warner Bros, for instance, planning to launch a merger between Discovery+ and HBO Max, seeking to become a direct competitor to Netflix.
On the other hand, the “password sharing” phenomenon. Many customers share a subscription, splitting costs; of course, this means considerable losses in revenues for Netflix (as well as other streaming companies). No streaming provider has found a solution to the problem yet.
Musk’s takeover of Twitter
Elon Musk, Tesla and Space X CEO, has struck a deal for the takeover of Twitter for $44 Billion. After the board unanimously approved this bid, shareholders will now be asked to vote on the deal worth $54.20 a share. Musk has secured $25.5 billion worth of financing for the deal, meaning he will take up a $21 billion stake himself. Commentators have discussed what this will mean for the platform politically, with Musk claiming he wants to make Twitter an ‘inclusive arena for free speech’. We may see swings in the platform’s stance like the removal of former president Trump’s ban. Continuing with this sentiment, Musk aims to increase general trust in the information on the platform by reducing the number of bots and verifying information. He has plans to make the algorithms open source in attempts to increase transparency. Along with political goals, Musk also aims to improve the Twitter’s performance as a business. With Musk being publicly critical of Twitter CEO, Parag Agrawal, we may see his tenure being cut short. Shifts in strategy surrounding Twitter’s subscription service, Twitter Blue, are also being forecasted.
“First timers” Activists boom from the beginning of 2022
Q1 2022 has started with a surprising spike in the number of campaigns reaching #73 as investment bank Lazard recorded at global level. The declining equity markets of the last 6 months have surely had an impact, and it is interesting to notice how a much larger share of total campaigns has been initiated by “first timers”. It was possible to observe the same trend also back in 2008 when today well-known Activists such as Ackman and Icahn built up their firms. On the other hand, times have been good in the equity markets in the last decade and the pool of undervalued companies has surely shrunk.
The question is now whether it will be just an unusual spike or the beginning of a new trend.