What is Happening With Netflix?
By Aren Loya
Netflix has been a service that has been around long before other streaming services and they have always seemed like the top dog in the competition between other companies. However, at the end of this year's first quarter, Netflix was shown as one of the worst companies in the S&P 500, dropping nearly 35% this year and 70% from last year's peak in November. There are many reasons why Netflix’s stock has decreased substantially in the past year and despite what you may hear, the Russia-Ukraine war is not one of the main reasons. Netflix is where it’s at because of the nearly 1 billion dollars in borrowed money back in 2014 that spiraled into 16 billion dollars in debt in 2020. Other contributing factors to the recent fall off of Netflix are the growing amount of free users and lessening interest in the shows that it has.
From the look of the stock of Netflix in the past 5 years, it’s not hard to see that they’ve completely plummeted in the last couple of months. This is partial since Netflix is deeply in debt and needs a way out of debt before it can start building its stock back up. According to The New York Times, “Netflix had been buoying its own stock by buying back shares, but said that because of its cash flow constraints, it has not done so this year.” This is showing that Netflix had a higher stock price mostly due to Netflix purchasing its stock to make the company look better so more people would invest thus helping them get out of debt. However, they started to lose approximately 200,000 subscriptions this year alone. This created a domino effect which made the stock price go down for Netflix. After their stock prices started to decline Netflix tried to scavenge what they could to keep a substantial amount of money to pay back their growing debt.
Netflix has also brought up another problem they have yet to solve, password sharing. For those of you who don’t know what password sharing is, it's when one person may buy a Netflix subscription but will share their login information with many others so that they may be able to use it as well. This is a major problem that they are facing because according to The New York Times article about Netflix’s problems it states, “The company disclosed for the first time that those 222 million paying customers were sharing their passwords with roughly 100 million other households.” Netflix is trying to fight against these freeloaders that are taking away their profit but has yet to come up with a viable solution. Lastly, my opinion on why Netflix has had its stock drop is because of the competition that can offer many other shows that make people feel comfortable. For example, The Office was a big comfort show for people, which ultimately led people to purchase a subscription, however, The Office was removed and many other comfort shows as well that led many people to purchase a subscription. This caused people to leave the service for other streaming services like HBO max or Hulu. It’s no coincidence that the stock price of Netflix peaked when Squid Games, the most-watched show ever, was buzzing around the world. That show then led people to Netflix, but without shows people know are good, and know they can watch, Netflix will continue to decline and eventually lose the streaming war between other competitors due to their own choices.
"Netflix Stock." Google Finance, Google, 2 May 2022, www.google.com/finance/
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0IzQIHY6YChoQ6M8CegQIIRAI. Accessed 2 May 2022.
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