Netflix: Introduction to Business

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Netflix Inc., which has a ticker NFLX on the New York Stock Exchange, is headquartered in Los Gatos, California. On February 12, 2022, Netflix’s stock was at its lowest at $584.26, peaked at $602.8847, and closed at $593.74.

Netflix’s most recently submitted report to the Securities and Exchange Commission was a 10-K on 27 January 2022 for the period that ended on 31 December 2021. Netflix’s most recent quarter ended on 30 September 2021 and was on 21 October 2021. The report identifies several risk factors for the companies during the fiscal year of 31 December 2021 (The New York Stock Exchange 2022). The risks include the ongoing coronavirus pandemic and the various responses to it, disruption of partner operations because of COVID-19 restrictions, and the global economic impact on consumer activity. The other risks relate to unforeseen costs and potential liability for negligence, copyright, and trademark infringement. However, in the 10-Q report, the company stated there had been no material changes from the risk factors previously disclosed under the heading “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.

Netflix’s website is easily accessible for users and makes the data for investors simply accessible. For investors, Netflix has a corporate site that contains information about the company’s financial releases and updates, quarterly earnings, annual reports and profiles, the Securities and Exchange Commission filings, stock data, and investor relations contacts. At the top of the page, the user can access sections News & Events, Environmental, Social, and Governance information, and data about the Resources of the company (Netflix Investors 2022).

The up-to-date information about the stock price from the New York Stock Exchange site is presented at the top of the page and shows the last uploaded information date. The company states that risks related to the business are connected with successful member attraction, creating competitive, entertaining videos, COVID-19 pandemics, unforeseen costs, and several partners and investments (Nasdaq 2022). The impact of the pandemic on the business is about governmental, business, and individual actions as a response to COVID-19 restrictions, the limitation for the company’s employees to travel, and delayed content releases as a consequent outcome.

Some risks are connected with the content the company receives as if the content does not correspond with the rules and requirements of Netflix; further removed from the service, litigations to defend the company’s claims are unpredictable costs and damages. The risks tied to Netflix’s partners are related to their obligations and service providing. If some of the cable, satellite, and telecommunications operations connect consumers to multiservice discovery interfaces, Netflix might be impacted. The company states that it might be time-consuming and expensive to investigate, inquire, and make information requests whilst managing risks; however, these actions are inevitable.

The recent fall in Netflix stock is caused by several factors, where the company lost 150 bn in market value (Financial Times 4). The stock price was mostly caused by Netflix’s predictions that subscriber growth would subside (Sperling 5). First, the platform has been seeing tremendous growth during the pandemic because people are being forced to stay more at home (Sherman 3). As for the choice of entertainment, consumers have often turned to Netflix and other streaming platforms. This has led to a surge in growth and record-high stock valuation. However, as the pandemic is at its ending face, the valuation of the stock decreases as the projected growth and revenue are predicted to stagnate.

The second factor for the demised growth projections is because of the economic distress caused by the pandemic. A major source of Netflix’s users is in Latin America and the region is currently seeing economic hardships that slow down consumer spending. As a result, Netflix’s subscriber growth rate in the area is expected to follow the same pattern (Nicolaou 6). Consequently, with the expected emerging market’s economic hardship, Netflix does not have the ability to attract new consumers from these areas.

Lastly, the market has been mixed on the increased spending on content (Nicolaou 9). In the later years, Netflix has been spending more on the development of the company’s series and movies. This is caused by many of the larger producers of entertainment creating their own streaming services and excluding their own content from the Netflix platform. This move has forced Netflix to incorporate company-produced material into the library.

Nonetheless, content creation is a vast source of spending for Netflix that has had ambiguous results. This is mostly because of the variable results of the production, with major successes like Ozark and The Witcher. However, the company has spent much of its capital on flops like the Ranch and Marco Polo. Consequently, the market is responding to the uncertainty of the increased spending on content. Furthermore, the stock is influenced by Netflix stock is recent price increases for consumers. At the beginning of 2022, Netflix raised prices for all plans in the US (Nicolaou 7).

To summarize, Netflix has experienced a large increase in market valuation as a consequence of the global pandemic. Yet, the company is exposed to the users’ significant financial and legal obligations. Recently, the company stock has fallen drastically as the company missed projected user growth. The reason for the missed target was the reversion of the pandemic, economic hardship in emerging markets, and increased prices for Netflix subscriptions.

Works Cited

Company Profile”. Netflix Investors, 2022. Web.

“Item 1A. Risk Factors: 10-K Part I: 10-K Report: Netflix Inc. 2021 Annual Report | Netflix Inc.” Nasdaq. 2022. Web.

“Netflix stock market woe is warning to Hollywood.” Financial Times. Web.

Netflix, Inc. Common Stock”. The New York Stock Exchange, 2022. Web.

Nicolaou, Anna. “Netflix Stock Market Woe Is Warning to Hollywood.” Financial Times. 2022. Web.

Sherman, Alex. “For Netflix stock, it’s like the pandemic never happened”. CNBC. Web.

Sperling, Nicole. “Netflix stock drops after streaming giant predicts subscriber slowdown”. The New York Times. Web.

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BusinessEssay. (2023) 'Netflix: Introduction to Business'. 17 January.

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BusinessEssay. 2023. "Netflix: Introduction to Business." January 17, 2023. https://business-essay.com/netflix-introduction-to-business/.

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BusinessEssay. "Netflix: Introduction to Business." January 17, 2023. https://business-essay.com/netflix-introduction-to-business/.