With the coronavirus officially being classified as a pandemic, there are countless events that have been effective. I’ve certainly written way more articles about the subject than I ever thought I would. COVID-19 has had quite the effect on the industry, and its effects could end up having a bigger impact than expected. Theatrical cumes could plummet, projects could get delayed for months at a time, and the entire film slate from studios may need to shift to help prioritize the safety of their workers. However, if there was one company I thought would be just fine with all this, it’s Netflix.

After all, with people more uncertain about attending events or going to the theaters, you’d think they’d be staying home and streaming all night. And yet, Netflix’s stock won’t be immune to the ups and downs COVID-19 has brought with it. Yes, it’s done fairly well thus far, but it ultimately won’t be unaffected. Why?

You’d think that everyone staying home and watching Netflix would help them, wouldn’t you?

“NFLX charges a fixed price of $9-$16/month in the U.S., regardless of how many hours are watched,” Needham analyst Laura Martin said. “More hours viewed by existing subs are not monetized by NFLX.”

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Indeed, this is true. If my weekly hours watched go from 15 hours a week to 45 hours a week, Netflix isn’t seeing a dime of that money. If anything, this would just put more strain on their infrastructure and more cost to their resources. Unlike services like Hulu, Netflix features no ads, so they gain nothing from more watches.

But what about another alternative? Could the sheer number of people staying home mean that non-subscribers will actually be subscribing? Yes, that is possible, but given that there are already 61 million U.S. subscribers, it seems unlikely that COVID-19 would actually lead to more. Plus, we cannot ignore the fact that streaming services are a luxury. As weeks or months pass, it could lead to financial straits for consumers.

“Italy just quarantined its entire country implying millions of travel employees are not going to work or get paid, and travel globally has declined precipitously,” Martin said. “Since NFLX is a luxury, we assume international churn will rise and offshore revenue growth will slow until COVID-19 retreats.”

So, if anything, this whole thing could lead to a slow in subscriber growth. To make matters worse, Netflix is still spending billions of dollars on original content, with this year looking to reach $18 billion.

“Even if NFLX’s revenue falls, its content commitments are largely fixed,” Martin said.

What do you think of all this? Are you surprised that the coronavirus could lead to slowed subscriber growth at Netflix? Let us know your thoughts down below!

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SOURCE: Yahoo Finance