Netflix: losing its cool, not its value
Netflix is the ultimate Millennial company.
It’s not like it isn’t widely used by people of all ages, but when you think of a Netflix user it brings up images in your mind of a group of youthful urbanites eating avocado toast at brunch on a patio somewhere in a big city.
One of the people at the brunch is taking a selfie for the ‘Gram.
That’s Netflix’s people. Millennial hipsters that probably still think “cutting the cord” is an act of rebellion against the man, while paying monthly subscription fees to a multinational, billion-dollar company instead.
Here’s the thing though. If you look at the table of Millennials closely you’ll notice that they aren’t that young anymore. Tyler has some grey poking out in that beard and Kaitlyn is leaning into those Instagram filters to appear younger than she is.
Netflix is the same way. As the ultimate Millennial company, Netflix still views itself as being leading edge and youthful, when in reality its starting to push its middle age years. There’s nothing dangerous or novel about Netflix now. No, it’s very much the established streaming service in a world where streaming is the established way to consume television.
All this predictability leads to people overthinking things, as we saw this week when the 2021 Q1 results were released.
What did the earnings call tell us? Well, primarily that they failed to hit their subscription target by about 2 million, adding just shy of 4 million new subs in the quarter.
This means that Netflix is on track to add the fewest number of new users this year since 2014.
This news led to a little panic in the market, with the stock (NASDAQ: NFLX) crashing about 10% from a $559.58 USD on April 20 close to $506.68 on open April 21. It’s stayed there all week.
Here’s the thing. Like our avocado toast eating crowd, Netflix is entirely predictable by now. They add subs when they add new programming and the COVID-19 pandemic has limited the amount of new programming they had in Winter 2021. The shows coming out now would have been filmed at the height of lockdowns worldwide. This is as bad as it will get.
Additionally, as the pandemic lifts people are just going to watch less television. It stands to reason that the subs would be stagnant, but the circumstances around that flatness is fleeting.
A more interesting number to come out of that earnings call was the churn rate, which was less than it was a year ago at this time. They may not have added as many customers as they would have liked, but they aren’t losing customers either
I don’t have a crystal ball so I’m not telling you that Netflix is going to go up or down, but it’s really hard to see a scenario where it’s not still a significant business, both six months and six years down the road.
Like the Millennial generation, Netflix is entering its predictable, safe years. It might not be as exciting or new, but Netflix and Chill is still going to be a regular part of a lot of people’s lives for a long time.