2020, marked by the pandemic and lockdowns, was a favorable year for the streaming platform.
Several quarters early, Netflix is reaching its key financial goal: self-sufficiency. The leader in video on demand satisfies its shareholders by announcing triumphantly that it no longer needs to borrow billions of dollars each year to finance its frantic pace of series and film productions.
This statement comes as Netflix confirms that it exceeded the 200 million subscribers mark worldwide in the last quarter of 2020. To mark this milestone, management sent employees a bottle of champagne and confetti. From October to December Netflix recruited 8.5 million additional subscribers, 2 million more than analysts expected.
In less than ten years Netflix had had to borrow $ 15 billion. Reed Hastings, the founder of the Los Gatos (California) firm, today silences critics of its development model. At the end of each quarter, they put Netflix’s commercial and technological success into perspective by recalling that the company always “burns” more money than it earned.
Netflix now intends to maintain a debt load of 10 to 15 billion dollars, which should allow it to redistribute part of its profits to its shareholders. For example through repurchases of its shares on the market. Wall Street applauds. Netflix’s price on Wednesday morning was expected to open up some 12%. This brings the increase in the title for a year to more than 47% and 156% in three years.
Containment accelerated the trend
The popular success of series like “The Queen’s Gambit”, “Lupine” and “The Crown” continues to establish Netflix as the go-to platform for modern viewers around the world. Containment and the pandemic have of course accelerated the trend. But thanks to a large quantity of productions prepared in advance, Netflix has also differentiated itself from traditional television channels, owned by the big studios. While the latter had to significantly slow down their filming because of the pandemic, delay dozens of important releases, Netflix on the contrary continues to fuel the thirst for series of its confined audience. In addition, contrary to the fears of some, Netflix for the first time shows that Americans now also appreciate series shot in Spanish, French or Italian.
We also note that the sums that Internet users no longer spend in restaurants or cafes, due to the pandemic, are easily allocated to cover one or two monthly subscriptions of less than fifteen euros per month. This explains why Netflix was not afraid to increase the price of its subscriptions last October.
So much so that in 2020 Netflix broke its records for adding new subscribers. 83% of them come from countries other than the United States and Canada. The net slowdown in Netflix’s growth in its original markets remains for the moment largely offset by the enthusiasm of the public outside these countries.
Netflix’s financial independence has an immediate impact on Hollywood studios which copy its “streaming” model: while Netflix no longer needs to borrow to finance its ordinary operating activities, Disney, WarnerMedia and Comcast on the other hand, they will continue to lose money for months, even years, to develop their new platform in the world.