Netflix Thinks Its Weaker Second Quarter Was Just a Blip
Since its founding over 20 years ago, Netflix has significantly disrupted the global broadcasting industry with its streaming service. The company currently boasts 137 million subscribers, confirming its rank as the world’s biggest online subscription video service.
Two years ago, Netflix began a strategy of rapid international expansion to cover 190 countries. This has worked well and has fuelled the company’s stellar growth. The vast majority of new subscribers in the third quarter of 2018, about 6 million of the 7 million added during the quarter, came from international markets. This past quarter’s leap in subscribers was in sharp contrast to the results in the prior quarter, when the company failed to meet its own forecasts, casting a pall over the company’s long-term potential.
Nonetheless, there are growing competitive clouds on the horizon for Netflix. While it has been able to disrupt well-entrenched industry players, the company now has a target on its back. A long list of companies is now looking to disrupt Netflix.
Netflix faces competition from deep-pocketed companies such as WarnerMedia and Disney and Fox, which are moving to distribute their own content themselves, as well as from technology firms like Apple and Amazon, which are investing in original premium content to enhance their distribution platforms.
To its credit, Netflix has never been a company to stand still. Amid growing competition on all sides, Netflix wants to stand out by expanding its exclusive content library. The company is investing more than $8 billion in entertainment programming this year to lure new customers and keep existing ones. In the third quarter, it released its largest slate of original TV shows and movies to date, including new seasons of hits such as Orange Is the New Black and BoJack Horseman. Netflix executives also said audiences welcomed shows tailored to specific markets, such as Sacred Games in India, which the company identified as key to its expansion.
In addition to leading the way in all things streaming from a commercial perspective, Netflix has also gained significant footing artistically, scoring 112 Emmy nominations this year against HBO’s 108. Though Netflix didn’t break HBO’s incredible 17-year run, it did tie with 23 wins. We believe the company has set its sights on an Oscar, and we predict it will open a branded cinema in the next four years.
Netflix’s focus on content and partnerships will make it very difficult for competitors to catch up. It has a dedicated audience and a solid content portfolio that should help keep its current global momentum going.
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