Is Netflix a profitable company
Those who can afford to praise the competition in the highest tones are usually doing pretty well themselves. This is also the case with Netflix. The streaming portal surprised even optimists with its quarterly figures: it gained more than 37 million subscribers in the past year and thus exceeded the magic mark of 200 million - there are now 203.7 million. Revenue rose 24 percent year over year to $ 25 billion. The share price rose almost 16 percent on Wednesday to just under $ 582.
Those are the bare numbers that everyone is talking about now. However, if you want to know how Netflix is really doing, you should read the usual letter to investors more closely. In contrast to earlier messages, all competitors are mentioned - not only the usual suspects Amazon Prime, HBO Max or Apple TV +, but also Peacock, the portal of the NBC, Discovery +, Hulu and Paramount + group. And of course Disney +, although it is certainly no coincidence that there is an exclamation point behind the crazy growth of the competitor. "It's extremely impressive what Disney has done," said founder Reed Hastings during a video conversation with analysts: "There are now a number of offers of linear TV, video games and also user-generated content such as YouTube or Tiktok."
It's like Mercedes writing: "It's great how many cars Volkswagen has sold and that a new manufacturer will soon be added. It's really wonderful to be someone who needs a means of transport at the moment. There is then there are Audi and Ford and BMW, and people can now also buy Tesla electric cars. " It is a demonstration of Netflix's strength to praise its competitors, and that includes this supposedly humble phrase: "We will work hard to grow our small share of screen time over these significant competitors."
The time people spend in front of the screen has increased immensely because of the Covid pandemic
So it's about the time people devote to their own offerings, Hastings had already said in an interview with the SZ in March 2019: "We at Netflix would like to have one from the time people spend on TV, tablet or phone as large a share as possible. " There have now been two trends this year: This time when people were busy with televisions, tablets or telephones has increased immensely because of the Covid pandemic - but at the same time the number of competitors. And there were at least as many experts who predicted problems for Netflix as there were those who predicted further growth.
As a reminder, Netflix is the early bird in streaming that started and drove the digital revolution in the entertainment industry. Sure, the early bird gets the worm, but it has to get up earlier than the others and maybe look a little smarter. Netflix has done this for years, it has invested heavily in its own content - and in the products of other producers that already existed (for example the "Friends" series first broadcast by NBC). But the question was: what happens when these established companies finally realize that streaming is not the future, but the present?
What is happening can be seen at Disney + right now. The Disney group recently presented its strategy at the "Investor Day", it was a presentation of the magnificent feathers. By 2024, the company wants to have 350 million subscribers across all platforms and not only invest eight billion dollars a year in its own content, but also open the safe filled with classics. Fire from all creative pipes, and therefore the question was allowed: Which worms will remain for Netflix?
Well, the company has countered with content like "The Crown", "The Queen's Gambit" or "Mank", where people not only gave Netflix time in front of the screen, but also away from it. They debated the historical correctness of "The Crown" and the fascination of chess because of "The Queen's Gambit". At the beginning of the year, the big hit: Netflix wants to release a new film every week in 2021. Hardly anyone talked about the fact that the subscription fee was increased by a dollar a month almost everywhere.
Netflix does not want to make any losses this year and then be profitable in the long term
"It's great that Disney and we are competing like this," said Hastings, but added that it will be a while before the competitor presents something like the historical drama "Bridgerton" by Shonda Rhimes - a little swipe because Rhimes switched from Disney channel ABC to Netflix in 2017 after 15 years. Bridgerton ran in more than 63 million households in the first month.
All of this led to these terrific quarterly figures; to this self-confidence to praise the competition - and to this announcement, which immediately made investors rejoice even more. "We will no longer need external financing for our day-to-day business," said the letter to investors, and even more: The company does not want to make any losses this year and then be profitable in the long term, and Netflix is currently considering buying back shares from investors.
Put simply: the business model of aggressively investing in content and borrowing a lot of money for it (more than 16 billion dollars in ten years) has proven to be correct and sustainable - contrary to the forecasts of experts who compared Netflix with a house of cards that will collapse under the burden of debt. The company still has between ten and 15 billion dollars in debt, but the cash flow should allow it to be slowly removed without having to cut investments. So you can afford to praise your fiercest competitor over the green clover.
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