Netflix Reports Solid Global Growth, Spends Big on Content

Netflix reported stronger growth in international markets than expected, which is key to its ability to keep pace with increasing content production costs. In Q3, it added 6.96 million subscribers worldwide, beating its forecast of five million in July and 5.18 million predicted by analysts contacted by FactSet. The company expects to spend as much as $8 billion on shows and movies this year, with analysts forecasting that Netflix will actually spend as much as $4 billion more on content to be released in the future, for a total of $12 billion.

The Wall Street Journal reports that Netflix has also exceeded expectations domestically, adding 1.09 million customers, “compared with 850,000 subscribers in the year-earlier quarter.” In reporting subscribers going forward, Netflix will only focus on paid subscribers as opposed to those signed up for free trials.

The company’s own studio is now “the single largest supplier of content to Netflix on a cash basis.” It is also building a new production studio in Albuquerque, New Mexico that will create as many as 1,000 production jobs per year. In a letter to shareholders, Netflix acknowledged the “looming competition” from the likes of AT&T’s WarnerMedia, Disney and Apple, “all of which have plans for subscription services offering premium original programming.”

Though growth “in any one quarter is not attributable to any one piece of content,” Netflix is producing romantic comedies such as “To All the Boys I’ve Loved Before, released this summer, with the goal to “take share from Hollywood.” WSJ reports that, “more than 80 million of its accounts have watched one or more of the romantic comedies it released this summer.”

Wired reports that Netflix may not win Academy Awards, but is producing high quality fare that viewers like. The company’s first foray into such content was “Beasts of No Nation,” starring Idris Elba, which cost $12 million to make. Although Netflix had won Emmys and had Oscar aspirations for this movie, theater owners stymied that play by limiting the movie to “barely 30 screens.”

Now, three years later, Netflix is releasing “its most audacious dramatic feature line-up yet,” including director Alfonso Cuarón’s “Roma,” which “will almost certainly open on more screens — and for a much longer stretch” than “Beasts of No Nation” or last year’s Oscar-nominated “Mudbound.” Other notable releases are director Paul Greengrass’ “22 July,” filmmaker Nicole Holofcener’s “The Land of Steady Habits,” and Tamara Jenkins’ “Private Life,” as well as the Coen Brothers’ “The Ballad of Buster Scruggs.”

Signs point to Netflix lobbying hard for this premium fare, having recently hired veteran Oscar campaign strategist Lisa Taback. Wired notes these moves are a change from Netflix’s “strategy of volume over vigilance … [which] has made for a lot of cruddy meh-flicks.” It concludes that, “in its pursuit of Best Picture, Netflix is instead making some Very Good Ones. Hopefully, it’ll become a steady habit.”

Related:
Netflix’s Cash-Fueled Road to Streaming Dominance, The New York Times, 10/17/18