Netflix Reigns Supreme

Netflix’s subscribers surged past 200 million as the company closed out 2020, further
cementing Netflix’s status as the world’s biggest subscription streaming video service of its
kind. Netflix stock soared as much as 18% Wednesday 20th January to trade at an all-time
high. This news came just a day after the company revealed in its Q4 2020 earnings report
that it was considering stock buybacks and had surpassed 200 million subscribers for the
first time. This marks the largest jump since the company’s stock closed up 19% on October
18, 2016.

The streaming giant’s humble beginnings can be traced back to 1997 when it began as a
DVD-by-mail rental service in the U.S. In 2007, Netflix began offering a streaming video
service with licensed movies and TV series. It eventually moved into the content production
business, releasing its first original series, ‘House of Cards’, in February 2013. Currently,
Netflix offers its ad-free, subscription video-on-demand service in over 190 countries.

Pandemic Push

While all streaming services benefited from the pandemic’s stay-at-home boom, Netflix still
dominated. The new wave of demand for at-home entertainment likely helped push the
streaming giants’ paid subscriber count to more than 200 million for the first time. In
comparison, the breakout star in the so-called streaming wars, Disney Plus, secured up to
86.8 million subscribers in its first year. Disney’s Hulu service, which has been streaming as
long as Netflix, has 38.8 million subscribers, however, it only operates in the US. HBO Max,
which launched in May of last year has only 12.6 million active accounts.

Netflix cynics have openly criticized the company’s reliance on deficit financing to pay for its
vast amounts of films, television shows and producer deals, claiming that it would eventually
lead to the company’s downfall. However, Netflix’s bet seems to be paying off. Subscription
growth is indeed generating enough funds to allow it to begin paying back some of its
existing debt and to forgo new deficit financing in 2021.

Although the pandemic can be credited for the increase in Netflix subscriptions, there is no
guarantee that the new subscribers gained will remain once pre-pandemic entertainment
options reopen and life returns to normal. On the other hand, it can also be said that a lot of
the behaviours adopted throughout this period of distress, such as online shopping and
streaming services, will likely stick around. Thus, traders must keep their eyes peeled on any
pandemic progressions, good or bad, as they will likely have a direct impact on Netflix’s
stocks.

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