Netflix is huge and is only getting bigger.
When the company was founded more than 20 years ago, its biggest competitors were Blockbuster because the streaming service we know today did not exist. Instead, Netflix made money by renting out already-produced movies to consumers for relatively low rates — and the service is still around today.
Today, the company has gone from delivering physical movies to becoming one of the largest purchasers and producers of TV series and movies in the world. Netflix will spend more than $8 billion on original content in 2018, up from the $6 billion it spent in 2017. Due to the amount of money spent on programming versus improvements in technology and marketing, the company argued in its most recent conference call that it's "much more of a media company in that way than pure tech".
Netflix is now worth more than Comcast
Today Netflix's rivals are of Twentieth Century Fox and Time Warner, which have produced the likes of Avatar, Deadpool, Titanic and owns HBO and The CW, respectively. Netflix is quickly growing much faster than its rivals and has surpassed Fox and Time Warner by market capitalization, and has also overtaken NBCUniversal and Comcast.
Comcast's value fell this week when reports arose that the company would block Disney's merger with Fox by making its own bid for the company. Netflix meanwhile saw its value rise when analysts speculated Microsoft could purchase it.
Disney's $153 billion (on May 13, 2018) market cap is now within reach of Netflix, and the competition is increasing between the two companies as Disney pulls its movies from the streaming service in preparation of launching its own in-house one. The competition is growing more fierce as Netflix hires on high-profile showrunners like Shonda Rhimes and Glee creator Ryan Murphy, producer of Scandal and Grey's Anatomy for ABC, which is owned by Disney.
The company is proving to be successful because it has become so large that it could be compared to a television Network, without having to worry about expenses that other networks have to (ie. development of hardware for subscribers, delivery infrastructure). Netflix began by purchasing the rights to stream movies and TV shows, then moved into reviving shows that were cancelled before beginning to create its own original content.
Most arguably, Netflix is so successful because it is so anti-television. The New York Times points out that traditional television studios have specific channels for audiences, such as ESPN for sports, CNN for news and Bravo for arts and DIY. Netflix is completely against creating content only for specific audiences, and is in the business of producing content for everybody so that people are not led to believe the service doesn't have something available that they might like. Netflix doesn't need to make every show a hit because it doesn't rely on ads for profit, and CEO Reed Hastings has said he wants the company to take more risks in its programming because of this.
Quarterly Netflix subscription results in millions
To add to its success, Netflix has beat estimates for subscriber additions, which is one of the biggest impacts on its stock prices. The video streaming service added 7.41 million subscribers in Q1 2018, more than one million more than their forecasted amount of 6.35 million.
Customers on a paid plan rose 25 percent in the first quarter and make up 95 percent of the subscriber base on the service, with the rest being on a free trial or other offering.
📸: Unsplash 📈: FactSet and Quartz