TBI Weekly: Delving into Netflix’s results & its global insights

La Casa Del Papel

Prior to Netflix, there were exceptionally few TV-related companies that provided a global reflection of viewing trends and production insights through their quarterly results statements.

This data, coupled with the most recent three-month period in which locked down viewers have been hungry for entertainment, made publication of the streamer’s Q2 results late yesterday fascinating reading for almost anyone involved in the content business, no matter where you are in the world.

From blunt financials to the latest impact of Covid-19 on its global productions and the key shows that cut through, Netflix’s results provided a rapid-fire analysis of a business and an industry in the midst of rapid change.


Subs slow sending shares spiralling

Leading the headlines, of course, was the assessment that subscription growth would stall in the second half of the year, prompting investors to send the share price south.

Yet Netflix has added almost as many subscribers so far this year as it did in the whole of 2019. In its letter to investors, the streamer pointed to its previous quarterly update and confirmed that it was “expecting paid net adds” to be down in the second half of 2020, compared with 2019, with demand “pulled forward” from the coming six months.

Perhaps the reflection here is more on Wall Street investors who overpriced the stock thinking that customers freed from lockdown would keep coming at the same pace as they had when they couldn’t leave their homes, but it also hints at the myriad reasons behind why subscribers buy into Netflix in the first place – and poses numerous questions.

Would those customers – many of whom took up a subscription because they needed entertaining under lockdown – have become Netflix viewers anyway? What about the allure of new programming designed to entrance potential customers – again, would they joined regardless of the fresh shows?

Is the effect of the new content in the pipeline, much of it expressly designed to capture more customers, now diminished? And will ad-hoc subscribers who are now able to move more freely outside of home cancel completely?

Netflix said the “positive impact” of new seasons of both ​Stranger Things​ and ​La Casa De Papel (​aka​ Money Heist) had fuelled growth but underlined that the streamer takes little notice of “quarter-to-quarter fluctuations.” They are, it added, “not that meaningful in the context of the long run adoption of internet entertainment, which we believe provides us with many years of strong growth ahead.”

However the predicted slowdown will also provide a moment of reflection for other operators that have seen their numbers soaring recently. Sophie Lund-Yates, an equity analyst at UK-based investment outfit Hargreaves Lansdown, was more blunt in her assessment: “If you haven’t subscribed to Netflix during lockdown, the chances are you never will.”

The only thing that looks likely to change that, of course, is creating programming that can grab the attention of potential new viewers and lure them in, with growth most likely outside of established markets such as the US and the UK.

“While Netflix is still the biggest fish in the tank, if it wants to keep it that way, there is work to be done,” Lund-Yates continues, adding that “one of the biggest tools” for the company is its local-language programming. “These regions have a lot more growth potential than the mature US market. As it stands, Netflix offers three times the number of local language productions of rival Amazon, and it would be good to keep that lead.”

Control Z

Peering in at global productions

It seem unlikely that Ted Sarandos, its chief content officer and newly anointed co-CEO, will shift from that originals strategy.

The streamer said that its “main business priority” is to restart productions safely but admitted that the different circumstances around the world made a blanket approach impossible.

“Today, we’re slowly resuming productions in many parts of the world. We are furthest along in Asia Pacific (where we never fully shut down in Korea, for example) and are now shooting live-action series like season two of our Japanese original ​The Naked Director​,” Netflix said.

In EMEA, Netflix said it is back in production in “many countries”, including Germany, France, Spain, Poland, Italy and the UK, but the US is proving more troublesome.

Production had initially been re-started on two films in California, Netflix confirmed, as well as two stop-motion animation projects in Oregon, and there is an expectation that “more of our US productions” will start in the next three months.

But Netflix added that current infection trends “create more uncertainty for our productions in the US”, and also pointed to India and some of Latin America as also being “more challenging”, with a hope to “restart later in the year.” That will cause the first half of 2021 to be thinner in originals than the following six months, although Netflix still expects the total number of originals for the full year to be higher than 2020.

Acquisitions are also back on the agenda, with films such as ​The Trial Of The Chicago 7​ from Aaron Sorkin and ​The Spongebob Movie: Sponge On The Run​, as well as ​Cobra Kai and Emily In Paris.

“The pandemic and pauses in production are impacting our competitors and suppliers similarly. With our large library of thousands of titles and strong recommendations, we believe our member satisfaction will remain high,” it added.

Floor Is Lava

Big hitters

Netflix also revealed details of some of its most popular shows, with dramedy ​Never Have I Ever​ from Mindy Kaling being watched in 40 million households in its first four weeks, the same audience as comedy ​Space Force​.

On the unscripted front, Fremantle-owned Talkback seems to have bagged a winner with ​Too Hot To Handle​, which secured 51 million households in its first four months, while ​Floor Is Lava​ will reach “a projected 37 million households”.

Titles such as ​13th​, ​American Son​ and ​Dear White People​, part of Netflix’s ​Black Lives Matter collection​, also saw upticks, while around 27 million households chose to watch Spike Lee’s film ​Da 5 Bloods​. ​Extraction​ starring Chris Hemsworth and ​The Wrong Missy​ made it to 99 million and 59 million households respectively across their first 28 days, underlining the allure of Netflix while cinemas suffer from shutdown.

But it was local language originals such as Germany’s ​Dark​, ​Control Z​ in Mexico and Korea’s ​Extracurricular​ that the streamer lavished most praise on, reiterating that the fourth installment of ​La Casa De Papel launched on 3 April had been watched by 65 million households across its first 28 days (bearing in mind the streamer’s calculation that watching two minutes of the show constitutes a view).

The shows, along with Polish drama ​The Woods​ and ​Blood & Water​ in South Africa, “continue to be highly impactful, driving large viewing, buzz and sign-ups in their home countries,” just another example of the type of insight that the world’s biggest streamer has access to.

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