While most of the world sits at home during quarantine, Netflix stock prices have exceeded the value of US oil giant Exxon Mobil as the pandemic brought the steaming business to a record high.
Netflix shares rose on Tuesday to nearly $444.77 per share, bringing its market value to nearly $188.57 billion. The online streaming company has gained about 36% from the beginning of the year at a time when the S&P 500 lost 13%.
The US media-services provider along with other tech-companies such as Zoom and Peloton benefited from the pandemic, which prompted a worldwide lockdown in an attempt to tackle the spread of the disease.
Meantime, Netflix's business model is based on subscriber growth, not on traffic, which skyrocketed, adding 16 million subscribers to the service. However, traffic can only beneficial if the company is involved in paid ads like that of YouTube.
More traffic doesn't translate into more money. The company charges a flat monthly price of $9 - $16 in the U.S., regardless of how many hours a user spends on the platform. The traffic spike would have been profitable if it had an advertising-based model, but it doesn’t.
The cancellation of all sporting events and the closure of restaurants around the world has increased the demand for online broadcast services, yet, Netflix niche in the online broadcast market can be lost easily to new competitors such as Amazon, Apple+ and Disney+, cutting out its marketshare.
Netflix has gained most of its market share after it managed to beat blockbuster video rental prices and as internet spread throughout the world. Netflix simply had deep pockets, and Blockbuster Video was a dinosaur company that quickly went bankrupt.
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