In the early days of Netflix, co-CEO Ted Sarandos used to buck up his team responsible for filling the service with content by looking to the future.
“I used to try to get the team to wrap their head around the potential scale of the business by saying things like, someday we’ll be so big, we’ll have a VP of anime,” Sarandos recalled this week. “And then that someday is now.”
It’s true—Netflix hired Rob Pereyda last year as its first head of anime, the Japanese action cartoon genre.
And “that someday is now” as the company hit two huge milestones at the end of 2020. Netflix attracted more than 200 million paying subscribers. And, after spending billions and billions of other people’s money to cover huge deficits for the past decade, Netflix has reached financial self-sufficiency and created a sustainable entertainment juggernaut.
This must have been the vibe at Netflix HQ before the company announced its earnings on Tuesday afternoon:
Wall Street, as usual, focused on the small picture. How many subscribers did they add in the quarter versus how many did they say they would add versus how many did analysts predict on average they would add? (The answers, by the way, were 8.5 million, 6 million, and 5.9 million, respectively.)
But it was more the big picture that sent the stock zooming. Highlighted (or buried) on page 5 of Netflix’s quarterly earnings letter to shareholders was the revelation that the company would be cash flow positive this year despite spending close to $20 billion on new programming. And with $8 billion in cash on hand, that means “we believe we no longer have a need to raise external financing for our day-to-day operations.” Cash will be so plentiful that the company will even buy back some of its shares, a common price-supporting practice that Netflix hasn’t done since 2011. Even investors who haven’t watched a second of Bridgerton know that’s a positive.
Netflix stock, already worth over $500 billion, gained 14% in premarket trading on Wednesday morning to almost $574, within $2 of its all-time high. Although it jumped 67% last year as a leading member of the pandemic portfolio, the stock had previously lost 7% so far in 2021.
There was another change, more in tone and approach, highlighted in the shareholder letter. Netflix used to be known as the studio that wouldn’t share viewership numbers and wouldn’t tell even stars and producers how well their shows and movies performed. But now there’s data galore. Midnight Sky, the George Clooney-directed dystopian sci-fi thriller, attracted 72 million households in its first four weeks. Less-well-reviewed holiday flick Holidate starring Emma Roberts drew 68 million households. And the new favorite in the Pressman household, the French miniseries Lupin starring Omar Sy released this month, is projected to exceed 70 million in its first four weeks.