Epic wasnt kidding when they said it was long term plan. For those who dont know, Epic is betting on the game, like netflix did.
Netflix announced Tuesday in its fourth-quarter earnings report that it would not “need to raise external financing for our day-to-day operations,” a significant move for the heavily indebted company.
In less than a decade, the streaming giant borrowed over $16 billion to feed its titanic appetite for content. The reason: It
didn’t make enough money to cover both its entertainment productions and its business costs, like payroll and rent and marketing.
That fact has caused a longstanding gripe over Netflix’s business model, and it’s why some observers have long argued that Netflix is a debt-ridden house of cards that would eventually come tumbling down.
Reed Hastings, Netflix’s co-chief executive and co-founder, expected Hollywood would soon catch up in the streaming market, and the company stockpiled content as quickly as possible. To finance the hefty licensing and production costs, it borrowed the money. And kept borrowing.
The risk was clear: If Netflix didn’t generate enough cash by the time the debts came due, it would be in serious trouble. Mr. Hastings was betting that the company could attract subscribers (and raise its prices) faster than the debt clock was ticking. (Netflix was surprised that Hollywood waited years to jump into digital television, giving it an even bigger lead.)
The gambit seems to have worked. The company will still have $10 billion to $15 billion in debt, but it said it now made enough revenue to pay back those loans while maintaining its immense content budget.
The company said it added 8.5 million customers in the fourth quarter, for a total of 203.6 million paying subscribers by the end of last year, as the coronavirus pandemic fueled a surge in streaming services. The company has about 66 million customers in the United States. Netflix anticipates adding six million total subscribers in the first three months of this year.
Getting to over 200 million subscribers allowed Netflix’s operating profit to expand significantly, jumping 76 percent in 2020 compared with 2019. The company also said it would consider buying back some stock, helping to lift the value of its shares. Netflix’s stock jumped more than 12 percent in after-hours trading.
The company made $542 million in profit on $6.64 billion in sales in the fourth quarter. Investors had been expecting $625 million in profit and $6.6 billion in revenue, according to S&P Capital IQ.
The streaming giant borrowed over $16 billion in less than a decade as it built out its content library. The strategy prompted criticism that the company was unsustainable.
www.nytimes.com
Here is what netflix did, to reach where they are. Epic is on that road. Once their store users gets expanded, and get more exclusive, they will start to make profit. This is why they are heavily investing it now. PC is a big nomand land. With steam being lazy, Epic wants to brand itself as the next steam. With UE5 on their helm, they will have enough resources to expand their epic store.