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/