Netflix at 200 Million: Is the Streaming Race Over?

Tien Tzuo
4 min readJan 29, 2021

Netflix recently announced that it has over 200 million global subscribers, an impressive milestone. But more importantly, the company is “very close” to being free cash flow positive, despite previously forecasting a loss of up to $1 billion on the year. As Barron’s put it, “the big news was the revelation that Netflix is no longer a money pit. It’s now well on the way to becoming a cash machine.”

This is the same publication, I might add, that wrote an article called “Netflix Shares Could Dive to $45” in 2016. “Investors continue to overlook increasing cash burn and relatively modest income,” warned Barron’s. The stock is now trading at around $563.

Lots of people felt the same way back then. Do some googling and you’ll find plenty of articles with headlines like: “It’s Official: Netflix, Inc. (NFLX) Stock’s Run is OVER,” (Investor Place, 2016). Here’s another quote from Movie City News: “Netflix will be purchased by 2020… because the content issues will overwhelm their business, not too much unlike the way Netflix overwhelmed Blockbuster and the remaining mom & pop DVD/video stores.”

The bear argument against Netflix has always been that it will never be able to repay the huge amount of debt it has accrued ($16 billion at last count) to finance all those thousands of hours of content.

For example, here’s what Comcast CEO Brian Roberts told the Wall Street Journal when House of Cards came out: “Unless Hastings has figured out a way to lay off some of the [House of Cards] costs with a partner, or work some kind of production magic, this thing is going to cost Netflix a pile of money.” LOL.

That argument has now been settled. Not only does Netflix now have a significant competitive moat with attendant pricing leverage (get ready for your monthly rate to go up this year), but it’s also planning on an initial $500 million debt payment, as well as stock buybacks.

Of course, this will come as no surprise to Subscribed readers. As I noted in the book, borrowing heavily to invest in new content was simply Netflix using its recurring revenue as a competitive weapon. Unlike traditional movie production shops, Netflix starts every year with known, predictable revenue. It just made sense to use leverage, similar to a mortgage on a house, to invest in attracting new subscribers, especially if it also extended the lifetime value of their existing subscribers. That’s the beauty of a smartly run subscription model.

So now that Netflix has proven the naysayers wrong, is it all over? Has the streaming race been won? I don’t think so, not by a long shot. To paraphrase a line from The Social Network, “Two hundred million is a pretty good number. Do you know what’s an even better number? Two billion.”

According to a recent study from Juniper Research, there will be two billion active subscriptions to on-demand video services in 2025, which represents an increase of about 65% from the current total. Could Netflix capture at least half of that number, and become the world’s first billion subscriber company? It’s quite possible.

Let’s look at another juggernaut: Amazon Prime. Today, over half of all American households are Amazon Prime subscribers, so a 50% market penetration is certainly possible. Amazon Prime, however, is limited to the U.S. It’s hard for Amazon to replicate its logistics elsewhere, which is why other e-commerce vendors, such as Taobao and Flipkart, tend to dominate outside of the U.S. But Netflix doesn’t have that problem. In fact, most of its subscribers are already overseas (74 million American subscribers to 130 million abroad).

And this doesn’t have to be a winner take all situation. While lots of people have been trained to go to Amazon for all their e-commerce needs, the same dynamic doesn’t apply to streaming. Most people have multiple video and music streaming services. Netflix just has to be one of the services they pick.

Finally, as the success of Disney+ has recently shown, content is king. The idea that one company will eventually own all that content remains highly unlikely. Streaming video is a vast industry that will never be truly monopolized. Over the next decade, I predict that we’re going to see new streaming channels dedicated to sports, news, gaming, live events, business, you name it.

The market might wind up looking like the old Hollywood studio system, where the major streaming services act like the big studios, and the niche services act like the smaller indies. And as gaming technology and virtual reality increasingly seep into the rest of media, they will start creating entirely new subscriber experiences.

These days there’s a lot of doom and gloom about content saturation and “streaming fatigue.” Don’t believe a word of it. If anything, a more realistic subscriber number for this market is probably closer to global cell phone penetration. Streaming video is just getting started.

Two billion, here we come.


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Disclosure: These opinions expressed are mine, not those of the company. The companies mentioned in this newsletter are not necessarily Zuora customers.



Tien Tzuo

Founder and CEO of @Zuora (NYSE: ZUO) and the author of “SUBSCRIBED: Why the Subscription Model Will be Your Company’s Future — and What to Do About It.”