While many companies across the world are struggling to survive in this challenging time, Netflix Inc. ended the year 2020 with a big bang. More subscriptions were added beyond expectation and amassed with cash to build its entertainment empire without the need to borrow money.
The world’s top video streaming service company drew 8.51 million new subscriptions within the last quarter of the last year 2020. The most popular TV shows Bridgerton and The Queen’s Gambit helped in attracting new customers. Before the close of the year, the Wall Street analysts projected Netflix to add about 6.06 million new subscribers during the fourth quarter of 2020. Thus, surpassing around 40% from the projection.
2020: perhaps the best year for Netflix
While the year 2020 may be the most difficult year to many, it may be the best year for Netflix in ending the year with two milestones. For the first time ever, Netflix exceeded 200 million subscribers all over the world, and with the amass of cash, it can continue to build its empire without the need to access external financing. Part of the plan too is to buy back its stocks which is something Netflix did not do in the past 10 years.
The pandemic paved the way to accelerate the company’s business. As more and more people stay at home and have limited access to entertainment options like watching movies and concerts, Netflix became the major beneficiaries for all of these.
Netflix subscriptions surpassed projections
During the first half of the year 2020, the company added 25.9 million new subscribers. While the second half exceeded adding 36.6 million new subscribers to end the year with more than 200 million marks.
Earlier on last year, the company gave a lean projection for the second half of the year expecting leaner new customers as the first half already drew high numbers.
Spencer Neumann, the company’s chief financial officer, said in an interview with investors and analysts that the company shifted from linear to streaming service. With the spike of new subscribers last year, the company expects new subscribers to be lower than last year, Neumann added. In fact, their projection for the first quarter of 2021 is only 6 million new subscribers lower than the average analysts’ estimate of 7.45 million.
Netflix dispel critiques
There were some analysts who were skeptical of Netflix saying that the company’s growing debt poses a high risk when a recession takes place. With the recession happening, skeptics anticipated major cancelation from subscribers. Furthermore, they also argued that with competitors like Disney+ and HBO pulling their most popular titles like Avengers from Netflix to scale up their own streaming services, this was expected to create a negative impact on the company. Well, the numbers show that Netflix dispels those critiques.
To fund the company’s new programs and further improvements, the company had to borrow billions of dollars from external financing. Well, this year will be a different picture for Netflix. With so much cash, the company plans to buy back shares of stocks and further build the empire without borrowing from external financing.