How Netflix Can Overcome Pricing Challenges?

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Netflix, Inc. NFLX has had tremendous success in its international roll out. However, critics argue that most of that success has come because the company has offered its service at very low prices.


Robert Tomei, chairman and founder of Advanced Capital, was on CNBC Monday to discuss how Netflix can succeed without losing on margins or profitability.


Netflix Has A Leg Up


"Pricing is an issue that's why scale is extremely important, an ability to scale very fast," Tomei said. "And, I think, going from traditional media to new media to mobile. Mobile now is over 50 percent of penetration in terms of consumer activity. It's a trillion dollar market and about half of that is already on mobile and, I think, Netflix has a leg up on that versus traditional media."


Winning Market Share


Tomei was asked if Netflix is spending too much to expand internationally. He replied, "Spending is important, it is a huge part of their budget. But it's a market share war and , I think, the spending right now is actually driven to conquer market share and which is the most important factor at the moment."


Internet Advertising Is Winning At Cost Of TV Advertising


On the increasing rate at which advertising is shifting from TV to the Internet, Tomei said, "TV advertising, I mean that's you can see the trend is actually downward. If you look at it, I think, it's the internet advertising has gone from 18 percent to going to 25 percent in two years, in terms of market share. People are just shifting, millenials are shifting, they are not watching TV."
"They are getting their entertainment, their news and all the other media games and so on, on their mobile devices. China will have almost a billion people connected in 2018, most of those people would be connected through mobile devices and not television," Tomei concluded.

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Posted In: CNBCMedia
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