As countries battle coronavirus, Netflix struggles to earn profits in new normal

Edited By: Gravitas desk WION
New Delhi, Delhi, India Published: Apr 22, 2021, 11:49 PM(IST)

File photo of Netflix Photograph:( Reuters )

Story highlights

When employees return to work, Zoom will feel the pinch. When the curfews are lifted, delivery apps will suffer

We have seen many pandemic success stories unravel this year and it’s not just countries but also corporates that have been negatively affected by it.

The latest victim to this pandemic is Netflix. Last year was an absolute bonus for them as people were stuck at home and couldn't go out for movies or concerts. So entertainment had to come home.

Therefore, Netflix was on a roll last year. Adding 15.8 million new customers in the first quarter of 2020, this momentum continued through the year.

However, 2021 is a whole new challenge. The world is emerging from the pandemic, cinema halls are reopening and entertainment has gone virtual. So, the world doesn't need a Netflix subscription to keep busy and the numbers reflect this.

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Netflix added 3.98 million customers in the first quarter of 2021 and although this might sound impressive, the company still fell short of its six million target — by more than 30 per cent.

This led to their shares sinking. Netflix plunged 13 per cent in Tuesday's trade and their investors lost a lot of money.

The future doesn’t look much better too. The company is expecting just one million new users in the next quarter, but analysts are expecting more than four million.

So the company could be looking at another quarter of underperformance.

This happened as Netflix made more money during the pandemic lockdowns but now that the countries have opened up their economies, they are losing money.

Businesses that bank on disruptions rarely survive those events and Netflix is a prime example.

The market has also changed a lot since last year. Video streaming is not a monopoly any more and there are new players that are coming with some bold ideas.

The likes of HBO Max and Disney Plus have very different shows than Netflix which leaves the audience in confusion. Disney Plus has racked up 100 million subscribers and Netflix stands at 207 million.

However, every time Netflix faces a crisis, they have one go-to strategy — messing up regional content. However, it can be a one-way ticket out of the market and is essentially a gamble for Netflix.

Will companies that profited from the pandemic extend their dream run? Services such as Zoom video calls, food delivery apps, liquor companies and such had massive demands in 2020, but the pandemic year was an aberration and not the norm.

So, as and when we emerge from this pandemic, fortunes will reverse. When employees return to work, Zoom will feel the pinch. When the curfews are lifted, delivery apps will suffer.

Most of our consumption patterns will return to normal even if it's a new normal. This is will be a new challenge for these pandemic success stories.

The takeaway from these examples is that a sustainable business model is based on flexibility and it may thrive on disruptions but it should also survive once the disruption fizzles out. It is pretty clear now that whether it is a country or company, far-sightedness is the key to beating this pandemic.

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