As far as the video streaming space is concerned, it can be said that Netflix Inc (NASDAQ:NFLX) pretty much created the industry. Despite the onset of competition, the company remains the leader of the industry by some distance. Hence, it is interesting to figure out the company’s position in 10 years.
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It is believed that the next ten years could shape the future of the company since Netflix is expected to become profitable, boost subscriber growth, and also raise its subscription fee. In the period that ended in March, Netflix boasted of a global subscriber base of as much as 183 million and that reflects a year on year rise of 23%.
It may be difficult to estimate Netflix’s subscriber base in 10-year time, but at a conservative estimate should place the number at around 500 million. Excluding China, there are going to be 1.7 billion households globally, and assuming 60% of those households have access to high-speed internet, the number of potential customers could be 1.1 billion.
The company has earmarked $15 billion towards content production this year and the budget is only expected to rise, so as to produce content for a global customer base.
If the company can even attract 46% of those households, it would have a subscriber base of 500 million. At this point, Netflix has penetrated 60% of the households in Canada and the United States. Another important factor is the average revenue per user or ARPU. The global average for ARPU now stands at $10.87.
Netflix invests most of those revenues back into content production and hence, allows the company to eventually charge more. Experts estimate that in 10-years time, this figure could touch $14 per month. With potentially 500 million subscribers and ARPU of $14 per month, Netflix could generate revenues to the tune of $84 billion. That sort of a revenue figure could generate an operating profit of as much as $25 billion. Considering these factors, it could be worthwhile for investors to invest in Netflix and hold on to the shares for at least a decade.