The Top-Performing Stock of the 2010s Transformed Entertainment — And Returned Nearly 4,000%
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Back in 2000, Blockbuster declined a $50 million deal to acquire a little DVD-by-mail subscription company called Netflix. Today, that company is arguably the world's largest streaming service, an award-winning production house — and the highest performing stock of the 2010s.
Even by the bullish stock market's standards, Netflix's decade long run is remarkable. By Dec. 2 of this year, stock had sky-rocketed from its $7.87 price on the final day of 2009 to $309.99. That’s a 3,839% growth over the course of a decade, compared to the S&P 500's 179%.
With a return of that magnitude, a $1,000 investment in Netflix on Dec. 31, 2009 would be worth $39,389 as of the first week of December of this year, making Netflix the top-performing stock in the S&P 500 during the teens. The same $1,000 in index would be worth only $2,793.
What made Netflix’s decade better than everyone else’s?
Well first, it's worth mentioning that Netflix was a relatively small company at the start of the decade, so it's success was magnified by the fact that it had a lot of room to grow. While Amazon was sporting a $58 billion market vale and a $135 stock price at the end of 2009, Netflix was still a $3 billion company with a stock price below $10. (Amazon ultimately finished the decade as the eighth highest performing stock, with an increase of 1,224%.)
And then there were the milestones. In January 2010, Netflix was still a U.S.-only streaming service, meaning there was an upper limit on the number of subscribers it could add. That was a problem since subscribers are the company's primary source of revenue and the metric that drives the stock price: Investors look to 'subscriber growth' to determine Netflix's success each quarter, and those numbers weren't showing long-term promise.
It didn't help that Netflix relied completely on outside content, like Friends or Grey's Anatomy. The platform didn't provide something you couldn't get anywhere else — if consumers didn't want to pay for Netflix anymore, they could just find those on syndication or on DVD.
So Netflix did a couple of things to fix its subscriber problem...at least temporarily.
In 2010, it started expanding its business beyond the U.S. By 2017, it had made itself available to viewers in 189 other countries, and today, Netflix has upwards of 158 domestic and international subscribers, with 90% of its new subscribers coming from abroad.
It also started releasing original content, starting with House of Cards in February 2013, and consequently inventing the word binge-watch. The content wasn't just good — it was award-winning good, and it was available exclusively on Netflix's own platform. All of a sudden, people needed Netflix in order to keep up with the best TV shows and movies. It was a move that shook traditional production studios, set the stage for numerous other streaming platforms, and boosted Netflix's stock.
The 2010s weren't all good news, though. Netflix hasn't seen a positive cash flow since 2011, which has led to a good bit of skepticism about the company's business model. Creating content requires money, after all, and Netflix doesn’t profit off of ads or movie tickets the way a normal studio does. Every time subscription rates go up, consumers get angry. And keeping rates down will only become a bigger priority as competition increases (think: Apple TV+, Disney+). This next decade could be a rockier one for Netflix.
Although that sounds like something Blockbuster might have said all those years ago.