Apple (AAPL) may well be the next major company to enter the entertainment industry, as it has made deals with film studio A24 to produce movies and television programming. This also comes after Netflix (NFLX) recently cut Apple out of a setup in which Apple was receiving 15 to 30 percent of subscription revenue for sign-ups made through the Netflix app on Apple products. Those who have already signed up for the service with Apple will continue to subscribe through that company, and Apple will continue to receive a cut of the subscription, but those new to Netflix will now be directed to subscribe through the Netflix website.
These decisions may indicate an adjustment in strategy of some of the largest corporations, which seem to be shifting alliances and plans according to a changing business environment, especially in the entertainment industry. The recent move by Apple to sign deals with A24 suggest a swift entry into the entertainment industry, which would make them a direct competitor to Netflix, as A24 has already developed hit films and shows for Netflix such as Moonlight, Lady Bird, and others.
Problems and risks for Netflix in 2019
Netflix will face heavy competition in the coming year. They already face a challenging future competing with Hulu, which is now owned by Disney (DIS). Disney has, in this past year, also acquired 21st Century Fox, which owned about a third of Hulu. This means Disney is now in charge of all 21st Century Fox and Hulu products and intellectual properties. Along with the recent news that Netflix had lower-than-expected revenue, this increased competition from Apple and Disney could mean increased risk in Netflix, particularly as bigger companies continue to look to streaming for a more diversified income stream.