What to Learn from Netflix
Netflix Inc. continued its blistering growth in the fourth quarter, as mounting investments in original shows like “Stranger Things” and movies like “Bright” helped the streaming service sign up subscribers at a record rate.
Apple, Amazon, Google, Facebook, and Disney are all trying to dominate our screens.
But I’m bullish on Netflix for one big reason: content is all it does. It has one focus.
It doesn’t operate a social network, logistics platform, device company, or search engine. It makes, aggregates, and distributes content. That’s it.
And it is on a roll:
• For the first time, its market cap is over $100 billion
• It closed Monday with all-time high stock price of $227
• At the end of the fourth quarter, it had 110 million paid subscribers internationally
• It added 6.3 million subscribers internationally
• It added ~2 million subscribers in the United States
• Its fourth quarter increased 33%
• In 2018 alone, its stock price is up 30%
• It will invest **$8 billion **this year
• It expects to add 6 million subscribers this quarter
This growth comes at a significant cost, though.
To keep the digital barbarians at the gate, Netflix will invest around $8 billion in original content this year. Its marketing will increase to $2 billion, and its negative cash flow will increase to ~$4 billion this year. It has ~$18 billion in long-term streaming obligations.
These are investments from a company that, unlike its competitors, cannot lose this competition. To survive, it needs to win. And to win, it needs focus.
From mailing DVDs to House of Cards, Netflix’s long-term product focus is impressive and good business practice.
It’s an important lesson for those of us building organizations.
