Netflix released its 4th Quarter 2020 financial results yesterday, and that whoosh sound you heard is a financial juggernaut whizzing by us in an even higher gear. If you’re looking for a chink in the streaming giant’s armor here, you’re going to need a pretty powerful magnifying glass. The bigger marketplace question going forward may be how long a list of other streaming powers and wannabes may benefit from the downdraft provided by Netflix.
It’s pretty hard to get surprised by very much anymore when it comes to Netflix, but these latest results do pack several eye-openers. The company passed the 200 million mark for global subscribers. That makes it just a bit shy of ten times the size of the subscriber count for Comcast, the U.S.’s largest cable “giant”. Netflix added 8.5 million new global subscribers in just the last quarter, fairly crushing the pre-release estimates of 6.45 million. In yesterday’s “Earnings Interview” – not exactly a grilling I might note – the company noted that growth is up in all regions of the world. And it has grown these subscribers while steadily increasing its average revenue per user over 10 percent in the last three years. If anything, Netflix probably has the ability to raise prices more than it has to date.
For years, even in the face of spectacular subscriber growth, Netflix has relied on raising debt to finance its money-losing operations and investments in new programming. Netflix competitors – I think we can dispense with the term Netflix “killers” – could hope that the company’s bleed of cash would eventually catch up with it and force it into at least a spending slow down. Not happening folks. Netflix is still sitting on $8 billion in cash and it announced that beginning in 2021 it no longer expects to need outside financing for its spending. The company said would even be considering stock buybacks as it produces cash beyond its needs. Talk about the rich getting richer.
So it’s time for Netflix to rest on its laurels and make way for all of those snazzy new streaming entrants, right? Hardly. One of the most fascinating elements of the Earnings Interview” came from Reed Hastings, Netflix’s Co-CEO, who noted that for all its sub growth Netflix still accounts for less than 10% of TV viewing in the U.S. Eating into traditional TV viewership is a tempting and obtaininable goal. For Hastings and company, there are clearly plenty of metrics for increasing viewing time and engagement to measure success going forward. And even with 73 million U.S. subscribers, Netflix still noted that it has its eyes on luring traditional cable and satellite subscribers who haven’t yet signed up for Netflix.
When asked on the Earnings Interview who Netflix regards as competition, the only discussion of any length concerned Disney+. Despite well-expressed regard for all Disney has accomplished with its streaming service that is barely a year old, Netflix execs were pretty quick to point out that Disney+’s 87 million global households should really be considered more like 60 million if you eliminate the pre-existing nearly 30 million subs from Disney’s Hotstar service in India acquired in the Fox deal.
MORE FOR YOU
Netflix scale dwarfs every planet in the streaming universe, but its financial momentum continues in an environment with much reason for optimism about the future of streaming overall. Spectrum, the second-largest U.S. cable operator, noted yesterday that streaming consumption in the U.S. has increased 61% in the last year, driven no doubt by – although hardly exclusively by – the pandemic. There is little doubt of the commitment to new streaming investments by every major media company, from Disney+ to Comcast/NBC Universal’s Peacock, to ViacomCBS’s soon-to-be-launched Paramount+ to Discovery+. Traditional theatrical powerhouses Disney and Warner Bros. (through HBO Max) are as focused now on growing streaming subscribers as they are on generating box office bonanzas.
Deloitte reported back in October that the percentage of streaming viewers using ad-supported services has grew from 40% to 60% of the market in 6 months. This has reinforced and encouraged the acquisitions of ad-supported streaming services such as Tubi (by Fox), PlutoTV (by ViacomCBS) and Xumo (by Comcast). Locast.org, a service considered an outcast (no pun intended) by major media companies with its focus on redistribution of broadcast stations, has nearly doubled in its size over the last year and now itself has over 2.3 million subscribers.
And if you’re actually making content for the streaming world, it could hardly be more of a bull market. Netflix’s spending isn’t slowing anytime soon, as it just announced 70 new movies coming in 2021 (Ted Sarandos noted with a smile that the number is even bigger, they just haven’t announced more yet). Even beyond the “peak TV” dramas and comedies that have driven streaming sub growth, we see greater investment in other verticals such as sports, with an announcement in just the last week of a new programming venture from respected former ESPN CEO John Skipper. Expect only more of these types of independent investments in streaming to grow as Netflix’s good fortune continues its spread.