The Netflix Pandemic

The pandemic, while an impediment to the majority of the economy, has lifted certain sectors to new heights. Streaming services, among them, have seen subscription numbers soar now that many of us are staying home and limiting social activities, even as countries reopen around the globe.  

Netflix engagement has remained high, but the big story is the company’s subscriber growth over the past few months. While the company noted sign-ups had “temporarily accelerated due to home confinement,” the numbers showed nearly 16 million new subscribers in a single quarter, more than double the 7 million expected. Global subscribers hit 183 million, up nearly 23% from last year. Netflix is spreading faster than the Coronavirus.   

When you think of big tech (Amazon, Facebook, Google, Apple), Netflix now belongs in the category of true global dominators – its niche: entertainment. When consumers think streaming, they think Netflix – not Hulu, not Disney, and as of yet, not Amazon (holding breath here). Breadth of selection, alongside original content (i/e: House of Cards, Ozark, and Stranger Things) has helped the company keep a firm lead as the world’s top OTT (over the top) provider. A paid subscription model not only keeps viewers happy as a result of its ad-free environment but provides the company with a perfect combination of solid MRR, low attrition, and loyalty from customers.

How loyal? Millennials spend more time watching Netflix than they do all of cable TV combined. Netflix, as mentioned, has 183 million streaming subscribers globally. About 70 million of those are U.S. subscribers, but international growth rates are up an estimated 11% with subscriber counts continuing to surpass domestic numbers over the past couple of years. Oh, and then there’s Netflix stock, which has rewarded its investors with a 60% increase since mid-March (’20) when the market bottomed out in the wake of COVID-19 uncertainty. 

A lot has happened in 20 years. If we press rewind, Netflix was a relatively small upstart in the early 2000’s, with 300,000 subscribers opting for movies by mail. Profit numbers were absent, and operational issues gave rise to concern from analysts covering the company. Amidst the uncertainly, Netflix founder and CEO Reed Hastings flew to Dallas to propose a partnership with Blockbuster for $50 million, whereby Blockbuster would acquire the DVD subscription mail order company and represent their brand in its stores. Blockbuster balked at the offering, sending Hastings back to California with a bag of insecurity around future positioning. 

In an article published by INC.com in 2005, Hastings’ painted a new vision for the future – to reach 20+ million subscribers and become a company like HBO that would transform the entertainment industry. In retrospect, Hastings’ failed attempt at a deal with Blockbuster remains one of the biggest strikes of good fortune in business history, as the streaming service carrying a market cap of over $200 Billion has become the entertainment system of our lives.