After becoming a major strategic pivot in 2007 that essentially disrupted the entire entertainment industry, the company’s platform is now streamed in more than 190 countries and 30 different languages, reaching more than 200 million subscribers.
Over the past ten years, Netflix (NFLX) – Download the Netflix, Inc. Report has become the standard subscription-based on-demand video platform for consumers and has richly rewarded early investors with huge profits since its IPO.
The company has consistently expanded its customer base through unique content, an easy-to-use interface, data-driven recommendations, and long-term changes in consumer preferences.
Then came the global pandemic and only accelerated the widespread adoption of these types of streaming video platforms.
That said, Netflix still has some work to do to fend off competition from companies like Amazon (AMZN) – Get Amazon.com, Inc. Report, Disney (DIS) – Receive a Walt Disney Company Report, Apple (AAPL) – Get Apple Inc. ReportHBO Max, Peacock (CMCSA) – Get a Comcast Corporation Class A Report and Paramount+ (VIACA) – Get ViacomCBS Inc. Class A Report.
As the streaming wars continue to heat up, both current and future investors may be wondering what the company can do to continue its scorching pace of growth.
Last week, Netflix said it would raise its prices on all plans in the US and Canada, which should boost sales going forward, but it could also be a sign that user growth is slowing.
With a 12% year-to-date decline and 25% from its all-time high in November, Netflix will have to make a major breakthrough when the company reports its Q4 earnings on January 20 to avoid further declines.
Regardless of how Netflix stock performs in the short term, there are a few different strategies the company could implement to continue winning the streaming wars. Let’s take a closer look at them below.
Netflix continues to invest heavily in original content
Netflix’s business model relies heavily on the company’s ability to attract new subscribers, paying $9.99, $15.49 or $19.99, up from $8.99, $13. 99 or $17.99 a month last year, depending on the plan they select.
This is recurring revenue that brings the company millions of dollars each quarter, so it makes sense that investors would want to see subscriber growth on a consistent basis.
Part of what has helped Netflix become such a powerhouse in the entertainment industry is the company’s original content, which is definitely one of the best ways the company can continue to attract new customers.
Popular shows such as ‘House of Cards’, ‘Bridgerton’, ‘Squid Game’ and ‘The Queen’s Gambit’ have played an important part in the cultural zeitgeist, and Netflix desperately needs more hits like this to stand out in a crowded market.
The good news is that the company is already spending a lot of money expanding its content offering.
Acquisitions, including the recent purchase of Roald Dahl Story Co. from $700 million – Charlie and the Chocolate Factory, Matilda, The BFG, James and the Giant Peach, Fantastic Mr. Fox and The Twits — which Netflix gives the rights to some of the most popular children’s stories of all time — point toward an aggressive content creation strategy going forward.
The company also leverages its existing popular franchises, including Stranger Things, Ozark, The Crown and more, to continue to differentiate its library from competitors.
According to S&P Global Market Intelligence’s media research unit Kagan, the company would have spent approximately $13.6 billion in total content costs by 2021, including $5.21 billion for originals.
This total has increased from $10.81 billion in 2020 and $9.22 billion in 2019, telling us the company’s management understands that content is king in the streaming wars.
This year should also see another period of heavy investment in content from Netflix, with the Financial Times reporting that the company could spend more than $17 billion on content by 2022.
While it’s clear that Netflix is committed to spending a lot of money on expanding its content library, this number is still well below the $33 billion that Disney spent on new content in 2022, even though Disney’s total is about $10 billion. of sports rights.
Speaking of sports, it’s a little odd that Netflix hasn’t yet explored whether offering live sports to its streaming subscribers is another potentially lucrative growth opportunity, given the number of additional viewers it could bring.
Finally, it’s worth noting that Netflix can continue to use its own algorithm to learn more about what its subscribers want and in turn deliver better content, which is an advantage competitors are far from replicating.
Netflix did not immediately return a request for comment.
Netflix focuses on international growth
Another possible way forward for Netflix is continued growth in international markets, especially when you consider how many households around the world still don’t have access to the internet.
Territories such as Asia-Pacific, Latin America and EMEA offer huge opportunities for the company, especially as Netflix faces increasing competition domestically.
One of the ways the company can attract these international users is by marketing its content to a global audience.
Look no further than the company’s recent success with the Korean-produced show “Squid Game”, which was watched by approximately 142 million households in the first four weeks after the show’s release and led to strong subscriber growth. in that region.
According to a Bloomberg News report, Squid Game’s success equated to approximately $891 million in added value to the company, providing some confirmation of how rewarding a focus on international market growth can be.
Other recent international hits include the Spanish production “Money Heist” and the French production “Lupine”.
“We now produce local TV and film in approximately 45 countries and have built deep relationships with creative communities around the world,” the company said during its third-quarter results in October.
When the company has a hit show from a country outside of the United States, it can lead to new subscribers in those markets and word of mouth that exposes the company’s platform to entirely new customer bases.
“For the second consecutive quarter, the APAC (Asia Pacific) region was our largest contributor to member growth with 2.2 million net gains paid (half of total net gains paid) as we continue our service in this region improve,” the company said.
“In EMEA, net gains paid of 1.8 million improved sequentially from 188k in the second quarter as several titles had a particularly strong impact.”
In addition to international content, the company is trying to attract new subscribers by offering cheaper subscriptions in emerging markets, another move that could bring in a lot of money.
Netflix seeks third-party video games and licenses
Finally, it makes sense for Netflix to look into licensing some of its original content to third-party platforms in exchange for additional revenue.
One of the great draws of Netflix is that the company’s platform contains no ads, but putting together deals that leverage the company’s vast content library can breathe new life into old programs and boost ad revenue from platforms of all kinds. third parties are generated.
Then there’s the potential for the company in the video game industry, as Netflix acquired video game developer Night School Studio in 2021.
Offering a game streaming platform could take the business to the next level, especially given that the multi-billion dollar video game industry is expected to grow at a compound annual growth rate (CAGR) of more than 13% from 2021 to 2021. 2028 .