Netflix is as stable as any company on the planet right now

Not sweating it.
Not sweating it.
Image: Netflix
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Most companies are having a tough time these days. Netflix, however, is doing just fine.

The streaming service revealed today that it added more than 10 million global subscribers in the second quarter, beating both Wall Street estimates and its internal forecast by several million. Nearly 3 million of those new subscribers came from the United States—the biggest addition of US members in a single quarter in many years.

It was almost as impressive as last quarter’s earnings report. In Q1, Netflix added a record 15.8 million subscribers as many parts of the world began shutting down because of the coronavirus pandemic. The company said the accelerating growth of new subscriptions to the service was due directly to widespread home confinement.

While Netflix continues to grow internationally, analysts had believed the streaming service was hitting a wall in the US. This time last year, Netflix had actually lost subscribers in the US for the first time in its history. Since then, subscriber growth in the US has mostly been flat—until the last two quarters. The exact number is hard to pin down, but streaming consumption is definitely way up since the pandemic began, Nielsen reported.

Netflix is in a strong position to weather the pandemic, relative to its competitors. Because it had so much content already banked, its 2020 release schedule has hardly been impacted by the virus. (Traditional film studios, meanwhile, still have no idea how or when they’ll be able to release their movies.) Netflix has about 60 original films and TV series due for release in July alone—almost two new pieces of content every day.

Unlike Disney, which relies heavily on in-person experiences such as theme parks and moviegoing, Netflix’s only significant source of revenue—streaming—has skyrocketed during the pandemic. Disney and many other competitors, which own TV networks, also have to worry about the declining advertising business and the lack of live sports.

Investors have taken notice. Netflix stock is up 60% this year as one of the S&P 500’s top performers. The company recently surpassed Disney in market capitalization as the Mouse House deals with the fallout of movie theaters and theme parks shutting down.

But there’s reason to believe this won’t last much longer.

In a letter to shareholders (pdf), Netflix said it expected viewing to decline and membership growth to slow as the world begins opening up again. Accordingly, the company is only forecasting 2.5 million new subscribers next quarter. Netflix theorizes that some of its subscriber growth in the first half of 2020 was a “pull forward” from the second half of the year—meaning subscribers who originally may have signed up in the latter part of 2020 decided to fast-forward their subscriptions because of the pandemic.

As the US and other countries gradually reopen, viewers could spend a lot less time on the couch in front of their TVs. If that happens, Netflix’s increased competition could come into play. The company admitted that new streaming services from the likes of Disney, NBCUniversal, and WarnerMedia could create some “headwinds.” And for the first time, Netflix name-checked the mobile video app TikTok as a major competitor.

Still, even as the US and other countries gradually reopen, there are still few safe entertainment alternatives to pull potential subscribers away from their living rooms. Sports will continue this year without crowds. Theaters in the much of the US remain closed. Concerts aren’t coming back any time soon.

While Hollywood studios figure out how to safely put movies in theaters again, Netflix will continue right on releasing. Not every quarter will be as strong as the last two for Netflix, but it is about as secure as any company on the planet. Things are so secure that the company snuck a stealth succession plan into its earnings announcement: content chief Ted Sarandos was named co-CEO with Reed Hastings, a clear indication of who will likely lead the streaming service when Hastings decides to cash out.