Why Netflix is thriving and it won’t slow down anytime soon

A lot of citizens woke up on March to life under lockdown and social distancing became the  new rule. They were ordered to stay home and work from there. What happened next? Millions decided to subscribe to Netflix. The streaming model of Netflix looked like the perfect fit for the stay-at-home era.

In a recent article on Bloomberg, Lucas Show wrote:It’s very good for a service that lets people watch what they want when they want without advertising interruptions. And while most of its rivals release new programming a few times a month – if that – Netflix releases more new programs than there are days in the month.

The recession will inevitably prompt those most affected to cut their budgets. But what will they cut first? A $100 cable package, or a $13 Netflix subscription?

While the coronavirus pandemic has hit markets hard, it looks that some companies have the potential to emerge from the present crisis in better shape than their competition.

Last Tuesday, Netflix  kicked off earnings season for media companies, giving investors the first look at how the global pandemic has affected the entertainment business.

For companies such as Netflix the current crisis has been a boon for business. The group’s shares reached record highs this week as its market capitalisation jumped to $192bn, above that of corporate giants such as Exxon Mobil, Cisco and Disney.

The streaming service added 15.8 million customers in the first quarter of the year. This is a new record for the streaming giant that had never added 10 million customers in a single quarter. Netflix added 9.6 million customers in the same period last year. Revenue grew 27.6% year over year while net income more than doubled from $344 million to $709 million. While the S&P 500 is down 12% so far this year, Netflix is up more than 30%.

Most fear that Netflix could run out of shows, but the streaming giant says it will face minimal interruptions in its slate of programs until some time next year.

Lucas Shaw does not see any risk in the short term:
All the success could hurt Netflix in the long run. The crisis could accelerate the transition from cable TV to internet TV. That means Netflix’s growth may be slower later this year, or next year.

But in the short term, the world is a very big place. The company still has just 19.9 million subscribers in Asia, home to more than half the global population, and just 34.3 million customers in Latin America, home to nearly twice as many people as the U.S. Somehow, there are still people in the U.S. who don’t pay for Netflix. The service added 2.3 million customers at home.

Netflix was founded in California by Marc Randolph and Reed Hastings in 1997. By  September 1999 the company launched its DVD rental monthly subscription concept.

On May 29, 2002, Netflix decided to go public, selling 5.5 million shares at $15 per share, or $1.07 per share after adjusting for stock splits, bringing in $82.5 million. In January 2007, the company announced that it would start video streaming.

A US study in late 2017 showed that the number of domestic Netflix subscribers equalled that of all the cable subscribers combined – 73% of all US households. In 2018, the company had the largest share of the global video streaming traffic – 26.6%, topping YouTube’s (GOOG) 21.3%, Amazon Prime Video’s (AMZN) 5.7%, Twitch’s 3.5% and Hulu’s 0.4%.

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