Netflix (NASDAQ:NFLX) will reduce the bitrate of its streams for 30 days, in an attempt to lower its network traffic by 25%, per a BBC report. The announcement comes after EU industry chief Thierry Breton urged streaming platforms to help reduce their load on the continent’s infrastructure.
Internet traffic is increasing as more and more people are spending time at home, in line with social-distancing guidelines during the coronavirus pandemic. Telecom giant Vodafone (LON:VOD) reported a 50% rise in Internet use in Europe earlier this week, per BBC report.
Netflix videos in standard definition uses 1 GB of data per hour, while HD videos use 3 GB data per hour. So far, the bandwidth reduction applies only to Europe and not to the United States or other markets.
Notably, the amount of time people spend streaming spiked by more than 20% worldwide last weekend, including more than 40% in Austria and Spain, per a Bloomberg report. Netflix app installation leaped 34% last week in Spain and 57% in Italy, according to SensorTower.
For streaming services specifically, social distancing and lockdown measures are significantly increasing the number of people using their services at home.
According to a 2019 report by U.S. networking equipment company Sandvine, video accounts for over 60% of data delivered from Internet providers to consumers. Netflix accounts for about 12% of total traffic, Alphabet’s (NASDAQ:GOOGL) Google traffic, driven by YouTube, accounts for another 12% and Facebook (NASDAQ:FB) -owned apps comprise 17% of downstream Internet traffic in the Asia-Pacific region.
Meanwhile, YouTube is also reducing the quality of its videos in Europe, as an increase in home usage strains the continent’s Internet during the novel coronavirus outbreak, per a Reuters report. Moreover, the company has also launched a hub in 16 countries dedicated to verified, factual stories about the coronavirus outbreak.
Netflix, Inc. Price and Consensus
Netflix, Inc. price-consensus-chart | Netflix, Inc. Quote
Solid International Content to Counter Competition
Netflix’s expanding international content portfolio is not only expected to contribute to subscriber addition but also offset stiff competition from the likes of Disney (NYSE:DIS) , Apple (NASDAQ:AAPL) and Amazon (NASDAQ:AMZN).
Notably, Disney+ has gained 28.6 million subscribers since its November 2019 launch. It is predicted to hit 126 million subscribers worldwide by 2025.
Moreover, Apple’s aggressive pricing strategy of $4.99 per month for Apple TV+ has intensified competition for Netflix in the streaming market.
Nonetheless, Netflix is well-poised to make the most of this surge in consumption owing to its diversified content portfolio, courtesy of heavy investments in production and distribution of localized, foreign-language content and an expanding international footprint.
The company is working on projects across Mexico, Spain, Italy, Germany, Brazil, France, Turkey and the entire Middle East to drive international subscriber growth. Notably, the company’s streaming service is available in 190 countries.
Markedly, the company generated $1.56 billion in revenues from its Europe, Middle-East and Asia (EMEA) segment in fourth-quarter 2019. Netflix reported 51.8 million paid subscribers in EMEA market at the end of 2019, representing 31% of its worldwide customer base.
Moreover, the streaming giant will invest around $17.3 billion this year in content, according to a Wall Street forecast, up from $15.3 billion in 2019, per Variety report.
Last month, Netflix rolled out a new feature in its interface that will show the daily overall top 10 titles in a subscriber’s country, as well as the top 10 most popular series and films when users select TV shows or movies tabs.
Netflix currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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