Why Engagement Is So Important for Netflix
Hardly anyone is surprised at the performance of Netflix (NASDAQ: NFLX) stock over the past several months. Shares are up nearly 30% since the start of 2020 compared to a 6% decline for the S&P 500 in the same period. This was a direct result of the stay-at-home orders that were issued all across the globe, causing an increase in leisure time for consumers as they tried to find ways to pass the time. The company's first-quarter 2020 numbers were remarkable as the streaming giant added an impressive 15.8 million subscribers worldwide. Netflix is one of the rare businesses that is thriving during these challenging times.
It is precisely because of the coronavirus pandemic that Netflix had such a notable quarter. The cord-cutting trend has been going on for some time as consumers find less value in a traditional cable subscription and demand better convenience and an upgraded experience. The health crisis simply accelerated the recognition of the importance of having countless viewing options when and how you want them.
With everyone stuck at home, viewership has gone up. In the most recent shareholder letter, CEO Reed Hastings stated, "Like other home entertainment services, we're seeing temporarily higher viewing and increased membership growth." No kidding. Of the 183 million global streaming paid memberships as of March 31, 64 million watched Tiger King, and 85 million watched the original film Spenser Confidential. These are eye-popping numbers. However, Hastings went on to add, "We expect viewing to decline and membership growth to decelerate as home confinement ends."
Source Fool.com
