In 2015, Netflix (NFLX 0.73%) had its fair share of detractors. Analysts said that it was overvalued, burning too much cash, and didn't have a unique advantage compared to its competitors.
If you'd ignored those criticisms and invested $500 in Netflix stock 10 years ago, your shares would now be worth $3,834 (as of Dec. 18). The same amount invested in the S&P 500 would've grown to $1,659. The streaming service's success demonstrates that it did have a unique advantage that some analysts overlooked.
Image source: Netflix.
The power of being No. 1
Netflix was the first company to achieve a dominant market share in an emerging industry, which gave it a tremendous edge over the competition. Streaming was growing rapidly throughout the 2010s and 2020s, and it has now become the most popular way to watch programming. Earlier this year, 83% of Americans said they watch streaming services, according to Pew Research.
Because Netflix was the most well-known streamer, its subscriber count exploded as the industry expanded. It went from 62.7 million subscribers in 2015 to 301.6 million by the end of 2024. That's almost 100 million more than second-place Amazon Prime, based on data from The Motley Fool's State of Streaming 2025 survey.
NASDAQ: NFLX
Key Data Points
Compounding Netflix's advantage is an extremely low churn rate ranging from 1% to 3%, according to Parrot Analytics. The industry average is 5%, so Netflix both has and retains more subscribers than other streaming services. That gives it the flexibility to charge more and hike prices regularly while still maintaining a sizable subscriber base.
It's always easier to pick out winning investments with the benefit of hindsight, but you can learn a lot from the factors that have contributed to winning stocks. In Netflix's case, its status as the leading streaming service put it in the perfect position to capitalize on the growth of the industry.
