At the end of 2020, the number of subscribers on the popular US-based streaming platform Netflix crossed 200 million globally and it will no longer need to borrow billions of dollars to finance its broad range of TV shows and movies, the company informed.
As the financial achievement supported the company’s strategy of going into debt to take on major Hollywood studios with a flood of its own programming in multiple languages, Netflix shares rose almost 13 percent in extended trading.
The world’s largest streaming service had raised $15 billion through debt in less than a decade. Recently, the company said it expected free cash flow to break even in 2021, adding in a letter to shareholders, “We believe we no longer have a need to raise external financing for our day-to-day operations.”
It will explore returning excess cash to shareholders through share buybacks, Netflix said. It plans to maintain $10 billion to $15 billion in gross debt.
“This is in sharp contrast to Disney and many other new entrants into the streaming market who expect to lose money on streaming for the next few years,” said analysts.
From October to December, Netflix signed up 8.5 million new paying streaming customers as it debuted widely praised series “The Queen’s Gambit” and “Bridgerton,” a new season of “The Crown” and the George Clooney film “The Midnight Sky.”
According to data, the additions helped the company cross estimates of 6.1 million, despite increased competition and a price increase. With the new customers, Netflix’s worldwide membership reached 203.7 million. The company that pioneered streaming in 2007 added more subscribers in 2020 than in any other year, boosted by viewers who stayed home to fight the coronavirus pandemic.
Now, Netflix is working to add customers around the globe as big media companies ramp up competition. In December, America’s Walt Disney unveiled a hefty slate of new programming for Disney+, while AT&T’s Warner Bros scrapped the traditional Hollywood playbook by announcing it would send all 2021 movies straight to HBO Max alongside theaters.
Disney said in December it had already signed up 86.8 million subscribers to Disney+ in just over a year. “It’s super-impressive what Disney’s done,” Netflix Co-Chief Executive Reed Hastings said in a post-earnings analyst interview. Disney’s success, he added, “gets us fired up about increasing our membership, increasing our content budget.”
Netflix said most of its growth last year, 83 percent of new customers, came from outside the United States and Canada. 41 percent joined from Europe, the Middle East and Africa.
For January through March, Netflix projected it would sign up 6 million more global subscribers, behind analyst expectations of roughly 8 million. Revenue for the fourth quarter rose to $6.64 billion compared with $5.47 billion a year ago, edging past estimates of $6.63 billion. Net income fell to $542.2 million, or $1.19 per share, from $587 million, or $1.30 per share, a year earlier.