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Netflix Inc., the world’s largest streaming service, has projected to be cash-flow positive every year after 2021 and will no longer need external funding for its operations. The company also added more subscribers in 2020 than in any other year, reaching a global membership of 203.7 million, boosted by the pandemic quarantines. 83% of new subscribers came from outside the US and Canada, while 41% joined from Europe, the Middle East, and Africa.
According to Netflix, the company will also consider returning excess cash to shareholders via share buybacks, an additional announcement made during the earnings announcement where they announced EPS of USD1.19 on revenues of USD6.64 billion for Q4.
For the last decade, Netflix has raised USD15 billion through debt to help pay for its content each year to boost its catalogue, and changed into a replacement product for traditional pay-TV in millions of households. The company plans to pay back its outstanding debt that matures in 2021 with its more than USD8 billion of cash on hand, according to Netflix.
However, as Netflix has grown, the number of households with traditional pay-TV has dropped from a peak of 100 million in 2012 to about 75 million today.
In a statement to stakeholders, Netflix believes that they no longer have a need to raise external financing for their day-today operations. And according to eMarket analyst Eric Haggstrom, 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.
Netflix had signed up 8.5 million new paying streaming subscribers as it showcased various praised series such as “The Queen’s Gambit” and “Bridgerton”. With the 36.57 million of new subscribers, Netflix reported positive quarterly earnings for three consecutive quarters for the first time since 2014.
The rapid increase in subscribers and subsequent movement of all media companies toward streaming has given CEOs Reed Hastings and Ted Sarandos confidence that Netflix will be able to start consistently making money.
They intend to be a much larger and much more profitable self-funding company over time, according to Hastings during Netflix’s 2019 first-quarter earnings conference call.
In January 2011, Netflix’s market capitalisation was USD11.5 billion but today, it is more than USD220 billion.
