Netflix Inc. (NFLX) is a media company that offers consumers the ability to buy movie and TV entertainment services. Though the company has since adapted to a largely subscription-based model allowing customers to watch streaming television and movies online, Netflix still offers its original DVD service.
Since the fourth quarter of 2019, Netflix has operated as a single business segment, no longer reporting across domestic streaming, international streaming, and domestic DVD segments. In recent years, competition in the streaming media business has grown fierce, with companies including The Walt Disney Co. (DIS), Amazon.com Inc. (AMZN), and Apple Inc. (AAPL) launching services to rival Netflix.
- Netflix is a media company primarily known for its subscription streaming services offering access to a wide range of movies and television programs.
- Netflix's Asia-Pacific region was its fastest-growing geographic segment in 2020.
- Home-confinement measures related to COVID-19 have helped to boost Netflix's paid subscriptions in 2020.
- Netflix faces disruptions to content production amid the COVID-19 pandemic and related safety measures.
In 2020, Netflix posted positive cash flow for the first time since 2011. The negative cash flows in recent years were due largely to the company's strategy of spending heavily to finance growth, including the production of original entertainment.
The company noted in its fourth quarter press release that it believes it is very close to generating sustainable positive free cash flow (FCF). Based on its current cash balance and undrawn credit facility, Netflix also believes it no longer has a need to raise external financing for day-to-day operations.
Netflix has also seen significant gains to its net income and revenue in recent years. For the fiscal year (FY) 2020, annual net income was $2.8 billion, up 47.9% year-over-year (YOY). While the COVID-19 pandemic has triggered disruptions in much of the global economy, pandemic-related home confinement measures have helped to increase the company's global paid streaming memberships by 21.9% in 2020. Annual revenue rose 24.0% to $25.0 billion in 2020, which ended December 31, 2021.
The majority of Netflix's revenue is generated through its streaming services, comprising 99% of total revenue. The other 1% of revenue is generated by sales of DVDs. However, DVD sales continue to decline.
Netflix's Business Segments
Unlike many other media companies, Netflix does not sell ad space on its site, nor does it sell its user data. Essentially, the only source of revenue for the company is its subscriptions. Streaming services are available at three tiers, with higher-cost subscriptions offering streaming to additional devices and in higher definition.
Although it now operates as a single business segment, Netflix does break down its streaming revenue into four broad geographic segments: United States and Canada; Europe, Middle East, and Africa; Latin America; and Asia-Pacific.
United States and Canada (UCAN)
Streaming revenue from the United States and Canada grew 14.0% to $11.5 billion in 2020. It was Netflix's second-slowest growing region for the year. However, it comprises nearly half of Netflix's total streaming revenue with a 46% share.
Europe, Middle East, and Africa (EMEA)
Streaming revenue from its Europe, Middle East, and Africa region grew 40.2% to $7.8 billion in 2020. The region comprises about 31% of the company's total streaming revenue.
Latin America (LATAM)
Latin America streaming revenue rose 12.9% to $3.2 billion in 2020. It was the slowest growing region for the year. Latin America generates about 13% of Netflix's total streaming revenue.
Streaming revenue from the Asia-Pacific region increased 61.4% to $2.4 billion in 2020. It was Netflix's fastest-growing region for the year. However, it comprises the smallest share of total streaming revenue at less than 10%.
Netflix Recent Developments
The increased online activity resulting from the coronavirus pandemic has provided a boost to Netflix's business. However, the government-mandated lockdowns and shelter-in-place measures have hindered content production. So far, Netflix has been able to keep up with consumer demand for content. But if production fails to ramp up, offering enough content to keep subscribers satisfied could pose a problem in the future.
Netflix noted in its annual filing for 2020 that while production has resumed in many parts of the world, the ability to produce content remains affected by the pandemic.
How Netflix Reports Diversity and Inclusiveness
As part of our effort to improve the awareness of the importance of diversity in companies, we offer investors a glimpse into the transparency of Netflix and its commitment to diversity, inclusiveness, and social responsibility. We examined the data Netflix releases to show you how it reports the diversity of its board and workforce to help readers make educated purchasing and investing decisions.
Below is a table of potential diversity measurements. It shows whether Netflix discloses its data about the diversity of its board of directors, C-Suite, general management, and employees overall, as is marked with a ✔. It also shows whether Netflix breaks down those reports to reveal the diversity of itself by race, gender, ability, veteran status, and LGBTQ+ identity.
|Netflix Diversity & Inclusiveness Reporting|
|Race||Gender||Ability||Veteran Status||Sexual Orientation|
|Board of Directors|
|General Management||✔ (U.S. only)||✔|
|Employees||✔ (U.S. only)||✔|
Netflix, Inc. "Form 10-K for the fiscal year ended December 31, 2019," Page 30. Accessed Feb. 5, 2020.
Netflix Inc. "Form 10-K for the fiscal year ended December 31, 2020," Page 20. Accessed Jan. 30, 2021.
Netflix Inc. "Form 10-K For the fiscal year ended December 31, 2015," Page 15. Accessed Aug. 25, 2020.
Netflix Inc. "Q4 2020 Letter to Shareholders," Page 5. Accessed Jan. 30, 2021.
Netflix, Inc. "Form 10-K for the fiscal year ended December 31, 2019," Page 18. Accessed Feb. 5, 2020.
Netflix Inc. "Form 10-K for the fiscal year ended December 31, 2020," Page 22. Accessed Jan. 30, 2021.
Netflix Inc. "Compare plans and pricing." Accessed Aug. 25, 2020.
Netflix Inc. "Form 10-K for the fiscal year ended December 31, 2020," Page 23. Accessed Jan. 30, 2021.
Netflix Inc. "Form 10-K for the fiscal year ended December 31, 2020," Page 24. Accessed Jan. 30, 2021.
CNBC. "Netflix eager to restart production, has enough new content for 2020." Accessed Aug. 25, 2020.
Netflix Inc. "Form 10-K for the fiscal year ended December 31, 2020," Page 4. Accessed Jan. 30, 2021.