A Look into Netflix, Inc.’s (NASDAQ: NFLX) Possible Position in the Immediate Future

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By Daniel Craine on November 3, 2014 Company

Netflix, Inc. (NASDAQ: NFLX) has made a great niche for itself that is different than traditional cable companies. The company is currently in the middle of a transformation as they attempt to conquer all corners of the globe. The streaming giant’s growth plan might work out with their expensive and originally produced content offerings. Five years from now, however, given the possible risks and benefits of forthcoming changes to realize their growth and expansion, will Netflix, Inc. (NASDAQ: NFLX) be soaring high or tumbling downhill?

Netflix, Inc. (NASDAQ: NFLX) may become a mature company five years from now as they continue to grow within and outside of the U.S. market with a steady subscriber base. We are yet to see if their 90-million targeted member goal will be achieved. But as far as market position goes, Netflix, Inc. (NASDAQ: NFLX) is expected to maintain its proactive attitude of hunting new ways of changing the already established ways of the entertainment industry.

It is worth mentioning that Netflix, Inc. (NASDAQ: NFLX) was brave enough to release an unproven show skipping the conventional broadcasting per episode method. Prior to this, the idea sounded crazy, but after the success of “House of Cards” and “Orange is the New Black,” this method is now a standard operating procedure for the company.

The streaming giant is also expected to possibly exceed Walt Disney’s (NYSE: DIS) profitability come 2019’s end as streaming services are most likely be in demand across continents. Universal coverage is likely to be available to the Americas and across Europe. No doubt, Netflix, Inc. (NASDAQ: NFLX) will be a hit in Australia.

By the year 2019 the company’s growth strategy will have shifted to profit-making strategy as well. Netflix, Inc. (NASDAQ: NFLX) has established itself as a center of premium original content, and five years from now, the company will be an obvious choice for the 700-million households who prefer watching TV-style videos on the internet rivaling or even beating HBO’s 35% market share. Netflix, Inc. (NASDAQ: NFLX) may earn profits around $20 billion as adoption rates become higher and as broadband growth becomes faster.

While their growth rate may slow down in the U.S. market in the next five years, it is highly probable that profitability will still be considerably higher in the U.S. as compared to other markets. From a 23.7% contribution margin from last year, Netflix, Inc.’s (NASDAQ: NFLX) contribution margin went up to 28.6% during the last quarter. It is estimated to reach 30% in the U.S. in the first or second quarter next year, and the management intends to increase their margins by 200 basis points in the subsequent years.

Revenues from international streaming went up 89% during the third quarter and reached $346 million. This figure is approximately 23% of Netflix, Inc.’s (NASDAQ: NFLX) total streaming revenues, which is likely to expand materially in the next five years. Their figures will mainly relay on their viewer’s streaming and purchasing habits as consumer’s shift away from cable services is highly probable.