Tragedy, Triumph, And ‘Patriots’

It’s appropriate, in a macabre kind of way, that news of Netflix passing the 200 million subscriber milestone came on a day when the US logged fatality number 400,000 from COVID-19.

After all, Netflix was a beneficiary of the stay-at-home trade. Indeed, the company epitomizes staying at home. It’s synonymous with two things, and while both of which can happen anywhere, they’re typically associated with living rooms and bedrooms. One of those two things is irrelevant for our purposes, and the other is “binge-watching,” which the world did quite a bit of in 2020, a year during which going outside was dangerous and, in many dense urban areas, periodically prohibited.

In fact, it’s a bit surprising that the shares didn’t rally more than they did. Then again, when the measuring stick is Zoom or Tesla, the bar is probably set too high. Netflix held its own with Apple and Amazon over the course of the pandemic and beat the Nasdaq 100.

In addition to passing the 200 million subscriber mark, the company said Tuesday afternoon that it no longer needs to borrow to fund growth. That’s a big deal.

“We believe we are very close to being sustainably FCF positive. For the full year 2021, we currently anticipate free cash flow will be around breakeven,” the company said, adding that “combined with our cash balance and undrawn credit facility, we believe we no longer have a need to raise external financing for our day-to-day operations.” The letter also said the company “will explore returning cash to shareholders through ongoing stock buybacks, as we did in the past.”

That’s the kind of thing the market likes to hear. The shares soared in after hours trading.

For the full year, Netflix added 37 million customers and grew revenue by 24%. Q4’s 8.5 million additions was well above guidance and consensus. Operating profit surged 76%. The idea of breakeven free cash flow in 2021 marks a stark contrast with analyst expectations, which generally assumed another year in negative territory.

Netflix was unbothered by Disney’s entry into the space. “Our strategy is simple: if we can continue to improve Netflix every day to better delight our members, we can be their first choice for streaming entertainment,” the company remarked, on the way to acknowledging that Disney+ “had a massive first year [with] 87 million paid subscribers!” And yes, the exclamation point is in the letter.

It also looked as though Netflix is sandbagging for the current quarter, with guidance for paid adds that’s well below consensus.

Anyway, the company did acknowledge that its success was in part attributable to the world’s misery, although they put a positive spin on that, pitching themselves as an “escape” from the economic and human toll of the worst public health crisis in a century. In other words, the company said that without it, people might have been even more miserable.

“2020 was an incredibly difficult year with extraordinary loss for so many families, new restrictions that none of us have ever had to live with before and great uncertainty,” the release noted. “We’re enormously grateful that in these uniquely challenging times we’ve been able to provide our members around the world with a source of escape, connection and joy while continuing to build our business.”

That’s one way to look at it. I suppose triumphing from tragedy is acceptable when the tragedy isn’t your fault and your services are both sought after and enjoyed.

Meanwhile, America is still on the back foot in its battle with COVID. Donald Trump leaves the White House with 400,000 Americans dead from the pandemic. That is considerably more than the number of US battle deaths in World War II.

In a farewell video, Trump said he’s leaving the White House with an “optimistic spirit.” He also said he’s “truly proud” of everything he “achieved.”

Speaking on the Senate floor Tuesday, Mitch McConnell stated the obvious, but it was notable to hear him say it. “They were provoked by the president,” McConnell said, of those who stormed the Capitol earlier this month. “They were fed lies,” he added.

In the same farewell address, Trump said he’s “praying” for the success of the new administration.

If he were so inclined, there’s plenty of Netflix to catch up on. But it sounds as though Trump isn’t done. Late Tuesday evening, Dow Jones reported that he recently discussed starting a new political party. It would be called the “Patriots.”