Why Netflix's ad tier may be the company's 'growth engine'
Netflix (NFLX) reported strong fiscal fourth quarter earnings on Tuesday, beating expectations. Santosh Rao, head of research at Manhattan Venture Partners, joins Market Domination Overtime to share insights on Netflix's strategy, highlighting profitability as a key focus moving forward. Rao suggests that Netflix’s future growth will center on live sports. Rao notes, "That's the biggest trigger for the media companies; that is where the real action is." That Netflix raised its operating margin forecast for the full year to 29% is a "good sign," Rao says, noting that he expects ad revenue to make up for the high cost of live sports down the road. "[Ad tier is] going to pull in a lot of people, it's going to keep people there," Rao explains. "Over time, I expect them to raise prices, that's for sure, because they need to pay for all these expenses ... it's going to be their growth engine for the next few years and probably even surpass the ... paid subscription model." Additionally, Rao expects the ad-supported tier to expand and anticipates price hikes to support content investments and long-term growth. To watch more expert insights and analysis on the latest market action, check out more Market Domination Overtime here. This post was written by Josh Lynch
