3 Solid Reasons Why I’m Buying Netflix

There's no denying that the adoption of streaming video accelerated over the course of the past year, and streaming leader, Netflix (NFLX) added more than 36 million subscribers in 2020, bringing its worldwide total to 205 million, and helping push the stock price up 68% in 2020.

So how can the company improve on this in 2021? Let's look at 3 big reasons why....

1 - No more sharing your password...

Netflix has long put up with a certain amount of account sharing, even going so far as to say it was "a positive thing." Back in 2016, CEO Reed Hastings explained, "We love people sharing Netflix whether they're two people on a couch or 10 people on a couch," Hastings said.

However they appear to have had a change of heart. Recently viewers were informed that they could opt to receive a verification code by text or email to authenticate the account. They also had the option to verify later. "This test is designed to help ensure that people using Netflix accounts are authorised to do so," the company said recently.

The data suggests that as many as 33% of users share their Netflix password, according to data supplied by Magid Research. With 204 million subscribers, that could amount to at least 67 million unpaid viewers. Given the $14 monthly charge for Netflix's most popular tier, the company is potentially forgoing more than $11 billion in revenue each year.

This crackdown could help boost the company's monthly subscriber base, thereby boosting income.

2 - Licensing content?

The streaming giant has long argued that the biggest reason people subscribe to its service is the seemingly endless library of movies and television shows available on its platform. In-house titles including Stranger Things, Ozark, and The Queen's Gambit have catapulted Netflix to the top of the streaming video industry, and the company has promised that new in-house movies will be released every week in 2021.

They may be taking a page from the legacy media playbook and is exploring licensing some of its original content to other outlets, according to a report in The Information. Netflix is considering licensing some of its older movies and television shows out to some big channels.

Some Netflix originals, including Bojack Horseman and Narcos have appeared on other networks, and were co-produced by other studios that retained the rights to license them in the future. These recent discussions revolve around content that is solely owned by Netflix and could result in lucrative licensing fees for them.

3 - Low cost subscriptions

Two years ago, Netflix tested a mobile-only tier in several countries that was significantly less expensive than its existing services. The lower-cost tier was available on just one mobile phone or tablet at a time with standard streaming quality. The test was ultimately a success and later that year, the company announced the mobile-only plan was here to stay, initially rolling the plan out in asia. At the time, Netflix said it "will be an effective way to introduce a larger number of people in low income countries to Netflix. Potentially this service could sweep up price sensitive consumers in the US and Europe soon?

In summary

Netflix already has accelerated growth that occurred during the pandemic, and it's widely believed that some of that came at the expense of slower subscriber additions this year. That could be the case, but the streaming giant was cash flow positive last year, and it expects that to be the case for years to come.

So given the evidence, there are plenty of reasons to believe that for long-term investors, that the growth of Netflix is far from slowing down.