The allure of global Internet entertainment certainly holds Netflix in good stead from a customer engagement standpoint.
During the second quarter Netflix added 5.2 million subscribers, a record for that fiscal period.
“Over the next five to 10 years we’re excited about the number of stories we can tell, the increasingly global nature of content as people appreciate high quality content around the world, and we’re seeing that increasingly so,” Netflix CFO David Wells said during Tuesday’s Goldman Sachs 26th annual Communacopia Conference. “So, content is becoming more global, people are becoming more connected through these stories that we tell, so we’re going to have more and more content, we’re going to have more and global subscribers, we’ll be able to connect interesting stories across the world to audiences across the world. It’s just a freedom of watching where you want on a format that you want. And I think what we’re in now is we’re seeing the momentum of that shift to Internet entertainment really pick up stream and that’s helping drive our growth and we think that’s going to continue for the foreseeable future.”
In April, Netflix CEO Reed Hastings said the company plans to spend more than $1 billion in marketing to drive member acquisition. Netflix has “real scale” as a producer now, Wells noted.
“The offering that we’re giving to potential members and to current members is the strongest it’s ever been and it continues to become stronger,” he added. “The sort of incremental cost of adding an additional global subscriber as long as we’re able to produce something that increasingly a large portion of the world wants to watch, continues to go down. So, we can pay more for a piece of content or we can put more on the screen, if you will, for a piece of content and increasingly benefit from that global network of subscribers. I think it’s partly content and partly the shift, that secular shift to global internet entertainment that is becoming increasingly a foregone conclusion and sort of a given that’s helping drive the momentum for Netflix.”
How does Netflix find a happy medium regarding the right level of spending on content?
“It’s a bit of art and science,” Wells said. “You never quite know where on that efficient frontier you are with sort of the diminishing marginal returns of that additional investment. I take heart in the fact that we know for sure that the content investments that we’ve made are an important aspect of the growth that we’ve seen. So, I don’t think we have any regrets about the level of content investments we’ve made today. And if we’re able to continue to grow into increasingly a global provider with that global addressable market, then you should expect that to continue to make content investments that sort of follow that.”
Evan Magliocca, brand marketing manager for Baesman Insights & Marketing, told Loyalty360 that Netflix experienced some stagnation when it was dependent on a U.S. subscriber base.
“But its strategic push into global Internet entertainment has essentially opened up the globe for growth,” Magliocca explained. “Having clout as producers also helps achieve those goals. Netflix can produce in-line with its initiatives, not what’s in-line with some Hollywood studio. The expansion of Internet entertainment and its in-house production coalesce to drive global growth for Netflix.”