There’s much talk of a recession coming, at least in the news headlines. While we’ve yet to see particularly compelling evidence of this come through in anything but the gloomy media cycle, many investors and businesses alike are taking soundings and preparing to batten down hatches. While Netflix has taken a battering of its own in recent months, there’s some evidence that suggests it may still be favorably positioned enough to weather a recession well. Blake &WanyP.A entertainment lawyer, Brandon Blake, looks at this stance.
Tech Stocks Worst Hit, Entertainment a Safe Harbor
In brutal honesty, the entertainment industry itself likely has little to fear from a ‘recession climate’. Where we’re seeing the most stock-related issues is in the tech market, always a fickle landscape for booms and busts alike. However, the trends being looked for- free cash flow, decent growth potential, and reasonable prices, with less stock-based compensation- are all hallmarks of stocks likely to perform well in a downturned bear market.
Historically, entertainment does perform well in this sort of market, becoming a safe harbor (of sorts) for investors. However, we do definitely have an environment that’s running very saturated in streamers, and it’s inevitable the pecking-order battles we’ve seen accelerate over recent months as the ‘free growth’ cycle ends and subscriber saturation becomes a real issue will weed out the fittest and strongest in the event of such a downturn. The million-dollar question is- who will that be?
The Surprising Argument FOR Netflix
This hasn’t been Netflix’s year. Amidst some (often deserved) criticism for lukewarm content and abrupt heel-turns on their sharing policy, Netflix’s subscriber losses in Q1, with more anticipated to come, have not made it the most compelling entertainment asset in the market. However, they have one thing that may prove invaluable if we truly do enter a space where consumers begin to jettison entertainment expenditure and tighten their budgets- a widespread and saturated consumer base that, if usage statistics can be trusted, still has a lot of traction. Their brand may have taken a hit in recent months, but it’s still one of the best-known streaming brands in the space. Additionally, their recent stock dips have sliced a lot of top-heavy value off their buying price.
While nothing is set in stone in entertainment or the markets, those two factors could well position Netflix for a rebound in a tight economic environment- if they manage to address the trust and content issues that have been raised, that is.
Film and Television 