advertisement
advertisement

How Netflix Kept Growing In Q1–Even Without A New “Stranger Things” Or “Crown”

A smart strategy for scaling local-language content delivered surprising hits for the video-streaming service, which now has 125 million total subscribers.

How Netflix Kept Growing In Q1–Even Without A New “Stranger Things” Or “Crown”
[Photo: courtesy of Netflix]

Netflix’s virtuous cycle of converting more content into more subscribers played out mightily on Monday when it released its first-quarter earnings. Once again, the video-streaming giant blew past Wall Street and even its own predictions, adding an additional 7.4 million subscribers worldwide, and pushing its overall user base to over 125 million.

advertisement
advertisement

The growth is especially noteworthy given that none of the Netflix’s blockbuster favorites–Stranger Things, The Crown–dropped new seasons during the first quarter. New premieres included The End of the Fucking World and the sci-fi series Altered Carbon, and shows that returned included Marvel’s Jessica Jones, Grace and Frankie, and Santa Clarita Diet.

In an earnings call, the company said it is still on pace to spend about $8 billion on content this year, on original and licensed films and TV shows. A growing portion of that will go to local-language productions like O Mecanismo (The Mechanism) from Narcos creator Jose Padilha, which is tracking to be one of Netflix’s most viewed original series in Brazil. The company also gave a shout-out to La Casa de Papel (Money Heist), a Spanish language thriller that has become the most watched non-English series on Netflix in history.

“We’re drafting off a world that’s become more global and more connected,” said David Wells, Netflix’s CFO.

Talk Local, Act Universal

So far the poster child for Netflix’s local language strategy is 3%, the Brazilian series that content chief Ted Sarandos said is the “first example of local language, Brazilian TV working around the world.” That show was made with an entirely Brazilian cast and is shot entirely in Portuguese, yet it resonated with Netflix subscribers in many other territories. Aiding this kind of expansion is Netflix’s investment in better dubbing and subtitling technology.

“What’s really great is we can bring our technology know-how to bring a great story from anyone in the world to the rest of the world,” said Sarandos, who said he was particularly pleased with Casa de Papal, which Netflix is planning to expand into sequels and spin-offs.

“The scale on it has been, if it connects in the country (of origin), that’s what it’s built for,” he went on. “If it gets viewing outside of the country, that’s great. If it gets global viewing, like we’ve seen with Dark (a German series) and 3% recently, and Las Chicas del Cabel from Spain, we’re thrilled, and it scales wonderfully.”

advertisement

During the interview, Netflix execs did not address the recent fracas over the Cannes International Film Festival, which Netflix is sitting out this year, due to a rule that says that films that screen in the competition can’t be released on a streaming service for three years. But in his shareholder letter, CEO Reed Hastings said the company regrets skipping the festival. “We will continue to celebrate our films and filmmakers at other festivals around the world, but unfortunately we will have to sit out Cannes for now so that our growing French membership can continue to enjoy our original films,” he said.

When asked whether Netflix’s absence will affect other awards or its ability to attract talent, Sarandos pointed out that Netflix was nominated for five Oscars this year. He also said that the company released 33 films in theaters in 2017.

Those films, however, were released day-and-date on Netflix. “I think it’s become more and more accepted as part of the distribution norm,” he said. “Defining distribution by what room you see it in is not the business we want to be in. We want to be about making great films that people love.”

On The Horizon?

The news of Netflix’s growth yesterday shot shares up 7% in after-hours trading, even though the company experienced a 1.2% decline during the regular session on Monday over concerns as to whether it could keep up growth.

The majority of new users–5.46 million–came from overseas, where Netflix is continuing its global push. But with 1.96 new U.S. subscribers, Netflix is disproving the notion that its domestic audience is tapped out. Quarterly income spiked 43% year-over-year to $3.7 billion, with a net profit of $290 million.

On the earnings call, Netflix also said it was not opposed to acquisitions, such as its recent purchase of the comic book company MillarWorld, which is already being mined for content that will appear on Netflix. And Hastings made a very clear delineation between Netflix and Facebook, when asked if Netflix would experience any fallout from the government inquiry into Facebook’s recent data breach.

advertisement

“We’re very different from the ad-supported businesses,” he said. “We’ve always been very big on protecting all of our members’ viewing. We don’t sell advertising. I think we’re substantially inoculated from the other issues that are happening in the industry.”

When asked what Netflix’s biggest challenge is going forward, Hastings had a modest response. “We’re a fraction of the hours of viewing of YouTube. We’re a fraction of the hours of viewing of linear TV. We’ve got some great momentum and we’re very excited about that. But we have a long way to go in terms of earning all of the viewing that we want to.”

advertisement
advertisement

About the author

Nicole LaPorte is an LA-based writer for Fast Company who writes about where technology and entertainment intersect. She previously was a columnist for The New York Times and a staff writer for Newsweek/The Daily Beast and Variety

More