On March 16, Netflix Stock closed at $298.84. The same day the S&P500 Index closed at 2,368.13 – down almost 400 from the previous day close. Tough day for the economy. But, if we look today – a different story is painted. Netflix opened at $376; the S&P at a meager $2,498.08. Markets up ~5%; Netflix? ~26%.
We all knew that Netflix was a phenomenal service provider for all its flaws, but I ask whether this paints a future picture of our economy. Whilst everything else shuts down, tech companies seem to (mostly) be flourishing. I say no. I think what we have seen is a short-term response, and one that points to the fact that the industry itself is not untouchable and remains hampered by the same risks that other entertainment industries have felt.
Netflix has built its new image on building content. No longer merely licensing, but vertically integrating. House of Cards, Ozark (Season 3 came out last week.. its great). Tiger King… which has become an internet sensation overnight. However, I chalk a great deal of this up to good timing. As the COVID-19 horizon continues on and production of entertainment media grinds to a halt, Netflix will not escape unscathed. As their content begins to dry up, subscriber base will fall and people will continue to hop around to the next free trial they can find (Crave currently has one if you’re looking for your HBO fix – if you haven’t watched the Wire… now is the time). Netflix is simply delaying the inevitable. Tech remains grounded by the requirements of human interaction that have hampered all business, they just haven’t felt it yet.
Netflix is obviously not the only example here, Amazon Prime, Hulu, Crave, etc., I think are all in similar boats (albeit Amazon and Crave are more diversified in terms of their companies). A great deal of focus has been put on how they have had to reduce streaming service quality to support the amount of content, and the other immediate impacts (the crashing of servers for some online Board Games) but less attention has been paid their longevity – something I see as being limited.
*Incase my embedded links don’t work:
Netflix Stock: https://finance.yahoo.com/quote/nflx/history/
S&P Stock: https://finance.yahoo.com/quote/%5EGSPC/history/
Netflix Quality Link: https://techhq.com/2020/04/why-netflix-is-reducing-the-quality-of-video-streaming/
To your point, I think it’s going to be very interesting to see what happens as this pandemic continues if the content on Netflix doesn’t change and they aren’t introducing new titles. I’m sure COVID-19 is stalling a lot of TV and movie production so I’m curious to see how the content is able keep up with growing demand. I think the proliferation of all of these different streaming services, like you mentioned, and consumers jumping from one to the other, is creating this weird phenomena where streaming is slowly becoming just like cable. When it was just Netflix, I felt like my idea of streaming was that it replaced my need for expensive cable with one low monthly price, but now that there are more and more large streaming services, I feel like it’s easy for the average person’s streaming bill to reach cable-level prices on a monthly basis because you now have to have three or four or five streaming services. As we continue to be house-ridden during the pandemic, I’m sure I (along with many other people) will start running out of titles on Netflix and then maybe I’ll start having to get additional streaming services to keep up new content.
I agree with you, after the whirlwind of emotions that Tiger King brought me, I’m ready to try another streaming service or perhaps find a non-digital hobby to partake in. However, I won’t unsubscribe from Netflix anytime soon as I share the account with my family members, as I suspect most users do. The Economist posted some statistics from Nielsen recently, relating to the short-term increase of TV usage during times of crises, with similar increases during Hurricane Harvey and the New York “Snowpocalypse”. Interestingly, the Nielsen study cited that teenage viewership of live TV increased 31% in the week ending March 22nd and video game console usage also increased by 35%.
Economist article: https://www.economist.com/graphic-detail/2020/03/27/covid-19-is-a-short-term-boon-to-streaming-services
Outline of Economist article without paywall: https://outline.com/Fh69LG
Nielsen Study: https://www.nielsen.com/us/en/insights/article/2020/in-the-new-normal-of-covid-19-local-tv-news-proves-to-be-the-medium-of-choice-for-news-and-information/
Makes sense for stocks like Netflix to strive during this time. Especially with Tiger King taking over people’s lives. This is an amazing opportunity for Netflix to drive their value way up. Also, with the new app Quibi coming out April 6, it will be interesting to watch how well that app can do during a time when people have all the time in the world to use video streaming apps. I mean look at TikTok and how it blew up recently.