Burn baby burn – The Netflix cash strategy to stay on top
Netflix, the online TV streaming service, is gaining more viewers in the US and around the world, but is burning through astonishing amounts of cash in producing new content.
In 2018 Netflix churned through $3 billion in losses. Negative cash flow that accelerated to $1.3 billion in Q4, more than double the year before.
But it’s all a part of a plan according to Netflix. They claim they expect to burn through another $3 billion this year as well. This year’s plan is to make more original content, do more marketing, particularly outside the US and add even more subscribers.
On the plus side, Netflix continues to rapidly add new subscribers to its streaming platform and revenue continues to climb sharply.
Their intention is to keep the accelerator pedal down with spending and adding new subscribers to make it increasingly difficult for new streaming businesses to to get traction and reach critical market mass.
But CNN business reports that the business model can’t last forever.
Statista.com says, according to their calculations, Netflix will have more than 546 thousand subscribers in Thailand by 2020.
Neil Begley, Moody’s senior vice president says “It’s not sustainable.”
“Strategically, Netflix is doing all the right things. But they’ve layered over that a level of financial risk that would make a lot of people uncomfortable.”
But Netflix says they’re addressing the income side of the business as well with a rise in subscription charges for its US subscribers.
The streaming service added a 8.8 million new paid subscribers in Q4, 2018, even topping their own forecasts. Netflix now has 139 million paying members, up from 110 million at the start of 2018.
This equates to around 10% of total US screen time, a massive and growing slice of total eyeballs, cutting into the revenues of broadcast and cable services. And they’re growing their business without any advertising revenue.
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