Established in 1997 as a rental company that sent you DVDs in the mail, Netflix on Tuesday crossed a big milestone, further solidifying itself as one of Hollywood’s most successful businesses. The streaming service said that, after gaining 8.5 million subscribers in the fourth quarter of 2020, it now has more than 200 million subscribers worldwide, exceeding its own estimates.
The fourth-quarter profit for Netflix in 2020 was $542 million, down from $587 million in the previous quarter of the year. Its profits soared 21%, to $6.6 billion. In after-hours trading following the company’s earnings, the company’s shares soared as much as 12 percent.
For so many people, 2020 was an extremely challenging year with unprecedented losses, new limitations with which none of us had ever had to deal before, and considerable uncertainty, the company said on Tuesday. We are profoundly grateful that we have been able to provide our members worldwide with a source of escape, connection, and joy in these uniquely challenging times while continuing to grow our company.
The company pulled in 37 million new subscribers for the full year 2020, a 31 percent leap from the year before, Netflix announced. But another of its announcements may have helped boost the stock of Netflix on Tuesday: the company said it is very close to positive [free cash flow] sustainability.
We currently expect free cash flow to be even around broken for the full year 2021, the company said. We believe that there is no longer a need to increase external funding for our day-to-day activities. For investors who have worried about the company’s debt, content spending, and overall growth going forward, this is good news.
Netflix added that it intends to maintain gross debt of $10 billion to $15 billion as it generates excess cash, but will explore returning cash to shareholders through ongoing stock buybacks, as it has done in previous years. Another aspect of its business was also addressed by Netflix (NFLX): rising competition. With the launch of new streaming services such as NBCUniversal’s Peacock, Discovery+, and HBO Max from CNN’s parent company, WarnerMedia, 2020 has been a significant year for streaming. Not to mention, by notching more than 80 million subscribers, the huge leap Disney+ made.
Netflix seems unfazed by the proliferation of rivals as the longtime king of the streaming world. It’s an excellent time to be an entertainment consumer. There are a variety of options, from linear TV to video gaming to content generated by users, the company said. Our strategy is simple: we can be their first choice for streaming entertainment if we can continue to improve Netflix every day to better delight our members. A testament to this approach is this past year.
The company even went out of its way to say that Netflix still recorded the largest year of paid membership growth in our history, even though Disney+ had a massive first year.
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