Netflix: Buy, Sell or Skip? – The Curve

Netflix: Buy, Sell or Skip?

Twenty five years ago, two entrepreneurs founded a company where people ordered DVDs via a website that were then posted out to them. This company was called Netflix. 
 
In 2002, the company went public, only five years since being created. By 2012, Netflix launched its first original series, House of Cards. By 2016, Netflix’s streaming service was available globally (ex-China). By 2017, Netflix cracked 100 million subscribers (with 50% outside the US), won its first Oscar and released its first feature film.

Netflix has always faced competition. Whether it is free-to-air or cable TV vying for people’s eyeballs or more recently, Hollywood studios with immense backlogs of content and large budgets to create more.
 
In just over a year, Disney’s iconic content saw it attract more than 90 million Disney+ subscribers worldwide. Despite increased competition, in 2021, Netflix's still has 220 million subscribers providing it with significant ‘scale’ advantages.

As Netflix continues to sign up millions of households around the globe, their growing revenue will be reinvested in expanding their content offering, further improving the value of the service while also creating ever-growing barriers to new entrants.

Some more advantages;
- earlier move advantage has led to Netflix building a reputation of a 'must-have' product. Dislodging Netflix from this position will be incredibly difficult.
- it has operated in most countries for at least five years, well ahead of its peers and thus has a better understanding of what people from Brazil to Japan to Germany want to watch, further attracting local subscribers
- it has 'pricing power'; it can charge higher prices and not lose customers as service is almost considered a necessity.

Netflix is nicely positioned but execution is key. It will need to keep growing its content library wisely to maintain strong engagement and attract new subscribers. Netflix’s challenge will be to match the record subscriber additions it saw in 2020 due to pandemic-induced lockdowns. This has led to negative share price movements due to investors being more focused on short-term performance rather than the longer-term journey ahead.


Ready to start your investment journey?
Our Foundations of Investing Masterclass is the perfect place to start. 

Disclaimer: The Curve has been prepared solely for informational and educational purposes. Any information provided and serviced described in this website are intended to be of general nature and provide general information only. The opinions expressed by The Curve do not constitute investment advice and are not to be viewed as investment or financial advice.