If you thought Netflix was getting richer thanks to a pandemic, you’re wrong (Part 1)
The company needs to change its business model if it wants to survive in the meantime.
Drama production is stalling. Major sporting events have also been postponed or canceled. Parks, movie theaters and amusement parks are closed in turn to limit the spread of epidemics.
That makes Internet entertainment services such as Netflix, Spotify … expected to grow strongly. Spending more time at home means Netflix has more users.
In February, at the time of the corona outbreak, Netflix shares rose from US $345 to US $348 per share because investors expected the platform to live well despite the disease.
However, that only happens when the disease is moderate. From the end of February until now, Netflix stock price has been affected by the market. As of March 17, Netflix shares were only $ 289.8 per share.
In a new study, Laura Martin, an analyst from Needham pointed out the points that Netflix would also be hurt if the epidemic persisted. Accordingly, this analyst said that Netflix will be affected indirectly.
When user income is down due to the epidemic, signing up for a Netflix account every month is a luxury. Evidence for this, Laura Martin cited European Commission data on tourism accounting for 10% of GDP in France, 13% in Italy and 15% in Spain.
In the case of the three countries on the tourist blockade, millions of people working in the industry will not be paid. Since then, signing up for new Netflix is a luxury.
The business model is difficult to accelerate
Besides, Netflix is a business model that makes money from a fixed subscription each month. This means that Netflix’s revenue does not increase with the number of watch hours.
No matter how long the translation is, every month Netflix also earns that much subscription fee of the user. This is the downside of Netflix when compared to the model of making money from advertising like Facebook or Google.