Today we are going to be looking into how a small DVD company rose to become the pioneer of video streaming and boosting of over 200 million subscribers globally. One of the key questions investors ask is whether Netflix is making or losing money based on its financial statements. The company is clearly on the lead when it comes to content distribution and with the Covid epidemic it means more people are spending their time at home. Netflix as of the third quarter of 2020 had an estimated 195.15 million paid subscribers worldwide.
However, when you check their financial statements you will realize that while their net income is on the rise they are burning cash very fast. This is what I mean From 2017 to 2019 their net profits grew threefold from $0.6million to $1.9million. However, their free cash flows dropped from -$2billion in 2017 to $3.3billion in 2019. The reason for this can be attributed to how it accounts for amortization of their content investments and the fact that they are spending big on content. Consider this, Netflix spending on content rose from $9billion in 2017 to $14.6billion in 2017.
