How Coronavirus could hurt Netflix

As we watch the coronavirus continue to spread and process the shocking news that the entire nation of Italy is putting itself under quarantine, people seem to assume the coming “social distancing” will be good for Netflix if nobody else. If we’re all stuck at home we’ll all be watching it, right?

Yes, we likely will. And this Yahoo! Finance article explains why that could actually be bad for the most successful streaming service:

Netflix (NFLX) will be yet another company dented by the global coronavirus outbreak, according to Needham analyst Laura Martin.

[…]

…having more people at home to binge more hours of Netflix won’t necessarily translate into higher revenue for the company, Martin pointed out.

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

Netflix does not offer an ad-driven tier and has so far declined to take on an advertising-based business model, despite broad investor speculation as more competitors join the fray. That decision prevents Netflix from capitalizing on any upside from increased viewership that could arise as social distancing increases with the coronavirus outbreak, Martin said.

And given that Netflix was already saturated in the U.S. at 61 million domestic subscribers as of December 31, “it’s unlikely that COVID-19 adds new U.S. subs,” Martin said

If anything, their problem is that’s they’re too successful, at least in North America. Pretty much everyone who wants it already has it, so there’s not much room to grow. And the price doesn’t change no matter how much we watch. But the more we stream, the more Netflix has to spend to keep its servers running.

Netflix is an all-you-can-eat buffet, and we’re all Homer Simpson.

I can see some of the other streaming services picking up business while we’re all confined to our homes, though. And maybe, just maybe, could this be something that gets people buying subscriptions to newspapers and magazines again? A heavily discounted online subscription to, say, The Washington Post (and it’s always heavily discounted) could be very enticing at a time like this.