Film Tariffs? Netflix is Confused

Trump's tariff "bomb" strikes Hollywood, and Netflix, which has long been seen as a "safe haven" from tariff risks, is also unable to escape the blow.

According to Global Network, Trump proposed an immediate 100% tariff on all imported films, citing the need to protect the "rapidly disappearing" American film industry and to encourage production to return.

As a major streaming platform, Netflix's stock price fell nearly 2% on Monday due to concerns over rising costs. Citi analysts pointed out that in the worst-case scenario, Netflix's earnings per share could decrease by about $6, a drop of 20%, but the company has various strategies to mitigate the impact.

Netflix Hit: "Safe Haven" Status No Longer Secure

Citi analysts noted that Netflix was previously regarded as a "safe haven" from tariff risks, but Trump's policy will directly impact its business model.

It is estimated that Netflix's annual content spending is about $17 billion, with 60% produced in-house, and about 50% of that in-house content produced outside the United States. Under the 100% tariff impact, Netflix's earnings per share could decrease by about $6, a drop of 20%.

In the face of potential EPS decline risks, Citi analysts believe the actual impact on Netflix may be much smaller than the worst-case scenario, as the company has various options to limit the impact, including:

Shifting production to the U.S.: If producing content in the U.S. costs 35% more, the actual EPS impact will drop to about $2 per share.

Restricting U.S. users' access to overseas content: Reducing direct revenue impact through controlled content distribution strategies.

Raising subscription prices: If the increased production costs are passed on to U.S. consumers, it could lead to an approximate $7 increase in average revenue per user (ARPU) in the U.S. region.

Overseas Film Centers Facing Catastrophic Impact

Analysts pointed out that this tariff policy will have a "devastating" impact on major Hollywood production centers such as the UK, Canada, Australia, and New Zealand. The U.S. film industry and chain cinemas will also suffer heavy blows, as production studios may have to bear higher costs, and consumers may face higher ticket prices.

Data from the Motion Picture Association (MPI) shows that in 2023, the U.S. film and television industry had a trade surplus of $15.3 billion, with exports reaching $22.6 billion, maintaining a surplus in trade with major global markets.

Even so, over the past two decades, the U.S. has remained at a disadvantage in global competition with European and Asian countries, which have attracted filmmakers by offering generous tax incentives to offset some production costs In 2024, UK film and television production spending is expected to grow by nearly one-third to £5.6 billion, with about two-thirds coming from the five major American film companies and three major American streaming platforms.

However, experts question the significant challenges in actual film operations: what exactly qualifies as an "American film"? How is "import" defined? How will existing films respond? There are currently no clear answers to these questions.

Former ITV chairman Peter Bazalgette raised the question: "How do we impose tariffs on Netflix programs produced in the UK and distributed globally via the internet?"

Barclays analysts indicated that film studios may freeze activities until "policies are clarified." The White House has not provided further details, only stating that it is "exploring all options to ensure national and economic security."