Netflix Likely To Be Hit By Bandwidth Allocation In France

Netflix (NASDAQ:NFLX) is expected to be negatively impacted by a recent announcement by French telecom operators to practice greater ‘discipline,’ while allocating internet bandwidth.

Other giants like Alphabet’s (NASDAQ:GOOGL) YouTube and Facebook (NASDAQ:FB) are also likely to be affected as they take up majority of the internet bandwidth provided in the country.

Per Reuters, France’s four telecoms operators Orange, Altice Europe's SFR, Bouygues (PA:BOUY) Telecoms and Iliad have pledged to be more stringent during the bandwidth allocation process.

The announcement comes amid the global coronavirus outbreak, as the country braces for a surge in the number of people accessing the internet while being confined to their homes. Notably, France has asked its 67 million citizens to stay home to help combat the outbreak in the country.

Netflix, Inc. Price and Consensus

Netflix, Inc. Price and Consensus

Netflix, Inc. price-consensus-chart | Netflix, Inc. Quote

New Allocation Process to Hurt Growth in France

Netflix has been making huge investments in France in an effort to expand its foothold in the country.

Notably, the company has already developed 24 French titles and will invest more than €100 million to develop more than 20 new French-language productions in 2020. It also partnered with Vivendi (PA:VIV) owned Canal+ to strengthen its competitive position in France.

Netflix has been facing an unfavorable regulatory environment in France for some time. The first setback in the country happened with the government’s announcement to force video streaming platforms like Netflix to invest at least 25% of their revenues earned in France to fund domestic content production.

In a bid to leverage this setback and to expand its presence and become a major French-oriented studio, Netflix opened a new office in Paris with plans to develop several new shows as well as series and films developed by its production partners.

However, at a time when a majority of the French population are confined to their homes and are expected to consume huge amount of streaming content, the latest announcement is a unfavorable for Netflix.

Additionally, competition in France is likely to intensify with the launch of Disney’s (NYSE:DIS) Disney+ on Mar 31, 2020. Further, Amazon’s prime video is working on four new French projects set to be launched in 2020 and 2021, which include Voltaire Mixte, a dramatic comedy, and Opérations Totems, a spy series, among others.

These factors are likely to hurt Netflix’s growth prospects in France in the near term. Markedly, the company generated $1.56 billion in revenue from its Europe, Middle-East and Asia (EMEA) segment in fourth quarter 2019.

Zacks Rank

Netflix currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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