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Netflix announced a profit on Wednesday night and the results were disastrous. The company recorded its first major loss of US subscribers in the last quarter, and only 2.7 million paying customers added nearly half of what was expected in the world. Inventories fell by more than 10% just after the release of the report. This is a terrifying slowdown for a service based on growing subscribers, which raises new questions about how long the company can justify its spending on content.
Following the release, Netflix executives focused on international markets where subscriber growth remains healthy. Almost all of the company's new subscribers came from international markets during this quarter and, according to CEO Reed Hastings, much more needs to be done to grow.
"About 700 million households pay for television outside of China – the equivalent of one hundred million US dollars – and it's a well-established market," Hastings said at a call. investors Wednesday night. "Do we have enough content in each of these countries? The Internet is able to have very large customer bases. "
Netflix executives have also spent a significant part of their call talking about India, where the company expects significant growth. This is a largely unsaturated market, and on which Netflix has been trying to develop content for some time. Netflix is about to launch five new originals for India, some of which could also be marketed in the United States and Europe.
"We have seen consistent and steady increases and the engagement of our Indian viewers on whom we believe we can continue to build," Sarandos said. "The growth in this country is a marathon. We are in the long term. "
This international focus is bearing fruit, according to Sarandos. Three special shows – How to sell drugs online (Germany), The rain (Denmark) and Quicksands (Sweden) – have all found a large audience outside their home region. Sarandos said that each program had 12 to 15 million viewers, although they were "deeply relevant in their home country and traveled very, very well in the region", which allowed them to find audiences all over.
"We see real relevant content from around the world, at local, regional and global levels," he added.
At the same time, society is facing a steeper path than ever before in the United States. Netflix has lost subscribers this quarter for the first time in years, a combination of rising prices and a lull in content. As the US market becomes saturated with streaming services (with WarnerMedia, Disney and Apple all launching streaming services), the only way to grow outside the US. Netflix currently has 60 million domestic pay subscribers and Hastings estimates that they can reach 90 million, but the risk of market saturation is real and raises difficult questions for the company's content strategy.
"The spiral of Netflix subscribers reveals a dangerous beheading of their growth strategy," said financial badyst Eric Schiffer. The edge. "Investors can expect a level of development spending almost insane abroad."
But society is facing a number of issues that could affect its overall growth in the coming years. Netflix loses a number of highly watched licensed series, such as friends and Office, to competitors WarnerMedia and NBC Universal respectively. The absence of attractive originals, which affected the company's last quarter and contributed to the loss of 130,000 subscribers, will continue to grow unless Netflix can increase production. This is part of the company's plan: permanent studio sets were purchased for Netflix to produce movies and TV shows faster.
Leaders know that they will have to start replacing the favorite TV shows of the people they do not own, and leave for the services of competitors, with new shows and new movies. This immediate loss of licensed content will be felt more in the US than in other countries due to agreements with rights holders. It is a market on which they know they will have to intensify their game to satisfy their subscribers.
"We sensitized our members to hope to create their next favorite show," said Sarandos. "It's not that we're going to be where you can get anything and every time."
Netflix still invests a lot of money behind US series and movies, signing one hundred million dollar contracts with renowned showrunners such as Shonda Rhimes and Ryan Murphy. Adam Sandler Murder Mystery more than 73 million household accounts worldwide, more than the entire US Netflix database.
Although Hastings and Sarandos have not specified the amount of their budget allocated to US spending, the company is making big bets on Hollywood projects. bright, which starred Will Smith, cost nearly $ 100 million to win. Next film by Martin Scorsese, L & # 39; Irish, would have cost Netflix about $ 140 million. The company was also in talks to buy a movie theater in Los Angeles. Netflix does not give up on the United States, but it's essentially for everyone, all over the world. Executives are ready to spend lavish amounts of money on securing their generics, series, and creators in the US, to stay ahead of their major competitors, including Netflix's favorite TV and movie catalogs. are not available.
All this translates into an increased focus on international content, even for US users. That's why US subscribers are starting to see shows from Denmark or Spain promoted on the front page. People will start to see more Japanese anime and original Indian. Netflix's investment in each country will be more difficult to compensate because everything is in loop. But Netflix would have spent more than $ 15 billion this year alone in content. Society wants to fight to keep your attention. it is clear from their gains that the struggle is harder than ever.
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