Netflix: Four things which have driven its success

Netflix got a big boost from the pandemic last year, as demand for streaming movies and television soared.

On Thursday, it shared its full-year results with investors and its plans for next year.

Here’s what we learned.

The company now has more than 200 million paid members, up more than 30% from 2019. About 37 million people subscribed last year, including 8.5 million in the last three months alone.

The additions – as well as price increases in the US, UK and elsewhere – helped revenue rise 24% in the most recent quarter to $6.6bn (£4.8bn), while profit hit $542m. For the year, it reported nearly $25bn in revenue and almost $2.8bn in profit.

Netflix, which has taken on major debt to fuel its expansion, said the gains meant it expects to be able to stop borrowing to finance its operations and is considering using excess cash to buy back shares.

The disclosures helped the firm’s shares shoot up more than 9% in after-hours trade on Tuesday.

More than 80% of the new sign-ups last year came from outside the US and Canada, with Europe counting for the most new members. And Netflix shows are increasingly breaking national barriers.

For example, Netflix said that the French-language show Lupin, about a gentleman burglar, had shot to the number one spot in Brazil, Argentina, Germany, Italy, Spain and others – while ranking second on its top 10 list in the US.

The firm expects 70 million households to watch the show in its first 28 days.

The success of Lupin and other titles from the firm, such as Bridgerton, Tiger King and Money Heist, is a sign of the extent to which Netflix – which once relied on movies and shows made by other companies – has become a major force in film-making and television.

The firm, which pioneered streaming back in 2007, has over 500 titles in post-production or preparing to launch and has said it plans to release at least one original film every week in 2021.

In its investor note, the firm said it had “exciting news” to come this week about Bridgerton, stirring speculation that could include a new season of the popular costume drama.

The bonanza of new material is core to Netflix’s strategy of maintaining its lead as other companies, such as Disney, Viacom, HBO and others, put more effort into their streaming offerings.

Indeed, one host on US financial broadcaster CNBC joked that the firm’s hint about Bridgerton was the biggest revelation of the report.

“The big growth in streaming entertainment has led legacy competitors… to compete with us in new ways, which we’ve been expecting for many years,”

Netflix said in its investor note.

“This is, in part, why we have been moving so quickly to grow and further strengthen our original content library across a wide range of genres and nations.”

Paolo Pescatore, tech analyst at PP Foresight, said an “intense battle” lies ahead between Netflix and other firms.

“Netflix has far more to lose given its huge base while rivals are only starting to get going. Originals will be a key differentiator,” he said.

“There will be casualties. Viewers will have to make tough choices as they can’t afford all of the streaming services including those for music and games.”