Fortnite Leads Consumer User Battle Against Netflix

Fortnite announced on Monday (January 21) that its new updates are set to launch in a bid to extend its lead in the gaming sector as Netflix (NASDAQ:NFLX) has said that it’s losing out to the game in terms of consumers.

Eric Williamson, design lead at Fortnite, revealed on Twitter (NASDAQ:TWTR) that Fortnite would undergo a few changes in the week with small tweaks to shield availability, reduction of mobility and a few vaults including that of the Quad Launcher.

Many players of the game have often taken it social media to express the dissatisfaction with Quad Launcher, a strong explosive, and have requested it to be either nerfed or vaulted.

While Williamson hasn’t noted which other weapons would be vaulted, reducing the mobility for items and vehicles was one of the other tweaks mentioned.

The changes would be part of Fortnite’s V7.20 update with the game’s developers introducing a number of balancing updates which would set a level playing field while also making it more engaging. The developers have often asked the gamers to be vocal in discussions and introduced changes based on their feedback.

In November 2018, it emerged that Fortnite had over 200 million players, which is five times the figure it had in January 2018. Throughout 2018, the game’s availability was rapidly increased from iOS devices to Switch to Android. The game developers often released limited modes to boost up the gameplay.

Further, Epic Games, the developer of Fortnite, announced in May 2018 that it is providing US$100 million in tournament prizes in the game’s first year as an eSport.

The developments are on the heels of Netflix mentioning Fortnite as a service it is losing out to in terms of consumer screen time.

In a letter to its shareholders on Thursday (January 17), Netflix said that it competes with a broad set of rivals in the space.

“We compete with (and lose to) ​Fortnite​ more than HBO,” Netflix said. “There are thousands of competitors in this highly-fragmented market vying to entertain consumers and low barriers to entry for those with great experiences.”

HBO is a company owned by Time Warner which was acquired by AT&T (NYSE:T) in June 2018.

The streaming services company said that it earns around 10 percent of television screen time in the US and less than that on mobile devices. Further, Netflix said that it has lower percentage of screen time in other countries due to low penetration of its service.

“Our focus is not on Disney+ (NYSE:DIS), Amazon (NASDAQ:AMZN) or others, but on how we can improve our experience for our members,” it said.

It has to be noted that Disney hasn’t commercially launched its service yet, although it has a tentative launch set for late 2019. CNBC said in a report on Friday (January 18) that Disney has already lost US$1 billion in streaming thanks to its investment in Hulu.

In an earnings call, Reed Hastings, CEO of Netflix, said that the launch of Disney’s own service would only make a small impact in terms of consumer acquisition.

“We’re excited for their launch and maybe they grow over a couple of years to 50 million hours a day, but that’s out of the billion,” Hastings said.

However, Hastings reiterated that his company’s main competition isn’t just a provider engaged in streaming service.

“And so we compete so broadly with all of these different providers that any one provider entering, only makes a difference on the margin,” he said. “That’s why we don’t get so focused on any one competitor and really think our best way is to win more time by having the best experiences, all the things we do.”

The statement from Hastings is significant as Netflix registered one of its strongest quarters with its annual revenue growing 35 percent to US$16 billion in 2018. The company said that its operating profits have doubled to nearly US$1.6 billion.

Netflix noted that it finished 2018 with 139 million paid memberships, which is up nine million from the third quarter of 2018 and 29 million higher than the beginning of the year. However, the growth of Netflix pales in comparison with the growth of Fortnite which reached 200 million users in a shorter space of time.

Following the announcement on Thursday, shares of Netflix were down 3.43 percent over the two day trading period and closed the session on Monday at US$339.10. The stock had a day high of US$353 and a low of US$336.73 with over 26.62 million shares traded throughout the day.

Netflix has a a “Buy” ranking on TradingView with 15 verticals in favor, eight in neutral and five against. The stock has a “Moderate Buy” ranking on TipRanks with an analyst target price of US$396 representing an 16.78 percent upside from its current price.

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Securities Disclosure: I, Bala Yogesh, hold no direct investment interest in any company mentioned in this article.