Post by The Ultimate Nullifier on Apr 20, 2015 8:39:41 GMT -6
variety.com/2015/digital/opinion/credit-netflix-originals-splurge-for-surge-in-subscribers-stock-1201473857/
Credit Netflix Originals Splurge for Surge in Subscribers, Stock
Sometimes a success can seem so preordained that it’s easy to overlook the risk it took to get there. Such is the case with Netflix’s first-quarter results reported Wednesday, and echoing in its skyrocketing stock Thursday.
While it wasn’t surprising that the streaming service beat the Wall Street expectations for growth for its domestic subscribers base, it was how strongly that consensus was surpassed that was downright shocking: 2.3 million subs were added, which was not just well over the 1.88 million expected, but a reversal of a string of year-over-year declines going back several quarters that was starting to look like a permanent trend.
The natural question is why this sudden surge. While there’s no way to isolate any one factor, surely it can’t be a coincidence that Netflix leapt forward to 41.4 million domestic subs in the same quarter in which its slate of original series seemed more robust than ever. Not only did “House of Cards” return in March for a third season, but new series “Bloodline” and “Unbreakable Kimmy Schmidt” also made their debut.
Netflix is transitioning from just having one original series per quarter to having multiple offerings in the mix. The deepening of its content is putting the streaming service more on par with HBO, and that could not come at a better time considering the recent launch of HBO Now.
Netflix CEO Reed Hastings likes to say that there’s room in the market for both of them, but that’s probably just wishful thinking: Surely some segment of the viewing public is only going to pay for one SVOD service, so Netflix is stepping up in the nick of time.
Netflix is seeing a very expensive bet pay off, one that might have seem assured, but that’s not the case. It’s entirely possible Netflix could have spent the $2.6 billion the company has on its vast content library over the past two quarters and not reaped the benefits. There was no guarantee.
Netflix noted that spending on originals could triple over time from the 15%-20% spent on that $2.6 billion to half of that amount. Chief content officer Ted Sarandos is making that increase because, as he indicated in Wednesday’s conference call, originals achieves more viewing hours per dollar spent than non-original content.
Again — that efficiency was not necessarily pre-ordained. TV networks see originals fail and syndicated fare do the heavy lifting all the time.
The true test as to whether originals are driving Netflix will come in the second quarter, when there’s an even bigger slate about to bow: “Daredevil” is already launched, and another season of “Orange Is the New Black” will be joined by “Grace and Frankie” and “Sense8.” If the first quarter of the year was any indication, Netflix will see tremendous validation of its strategy all over again.
Credit Netflix Originals Splurge for Surge in Subscribers, Stock
Sometimes a success can seem so preordained that it’s easy to overlook the risk it took to get there. Such is the case with Netflix’s first-quarter results reported Wednesday, and echoing in its skyrocketing stock Thursday.
While it wasn’t surprising that the streaming service beat the Wall Street expectations for growth for its domestic subscribers base, it was how strongly that consensus was surpassed that was downright shocking: 2.3 million subs were added, which was not just well over the 1.88 million expected, but a reversal of a string of year-over-year declines going back several quarters that was starting to look like a permanent trend.
The natural question is why this sudden surge. While there’s no way to isolate any one factor, surely it can’t be a coincidence that Netflix leapt forward to 41.4 million domestic subs in the same quarter in which its slate of original series seemed more robust than ever. Not only did “House of Cards” return in March for a third season, but new series “Bloodline” and “Unbreakable Kimmy Schmidt” also made their debut.
Netflix is transitioning from just having one original series per quarter to having multiple offerings in the mix. The deepening of its content is putting the streaming service more on par with HBO, and that could not come at a better time considering the recent launch of HBO Now.
Netflix CEO Reed Hastings likes to say that there’s room in the market for both of them, but that’s probably just wishful thinking: Surely some segment of the viewing public is only going to pay for one SVOD service, so Netflix is stepping up in the nick of time.
Netflix is seeing a very expensive bet pay off, one that might have seem assured, but that’s not the case. It’s entirely possible Netflix could have spent the $2.6 billion the company has on its vast content library over the past two quarters and not reaped the benefits. There was no guarantee.
Netflix noted that spending on originals could triple over time from the 15%-20% spent on that $2.6 billion to half of that amount. Chief content officer Ted Sarandos is making that increase because, as he indicated in Wednesday’s conference call, originals achieves more viewing hours per dollar spent than non-original content.
Again — that efficiency was not necessarily pre-ordained. TV networks see originals fail and syndicated fare do the heavy lifting all the time.
The true test as to whether originals are driving Netflix will come in the second quarter, when there’s an even bigger slate about to bow: “Daredevil” is already launched, and another season of “Orange Is the New Black” will be joined by “Grace and Frankie” and “Sense8.” If the first quarter of the year was any indication, Netflix will see tremendous validation of its strategy all over again.