MarketLine Blog

Netflix: Self-created growth shows no signs of stopping

In October 2018 Netflix Inc. announced its 2018 Q3 results, showing a continuation of its subscriber volume growth with 5% growth on the previous quarter and 25% growth year-on-year. The company has performed well historically too, with a 500% increase in subscriber volumes expected between 2011 and 2018.

Netflix has performed so well for three main reasons. Firstly, the company was one of the first to make a serious commitment to online media streaming. The company has since established itself as the name in on-demand streaming and has no real competition. The only real alternative in the market is Amazon’s Prime Video service but usage rates are poor. Despite over 100 million paying subscribers to Amazon’s Prime delivery service, only one in four also make use of the Prime Video streaming service – despite it being a free inclusion in an existing product. Amazon’s low usage rates will hold the company back in the future and Netflix will certainly take up the lion’s share of the new entrants to the market. Netflix has also managed to effectively utilize Google’s Chromecast technology, an increasingly popular device allowing users to easily watch many video services on their TVs. Amazon – due to its ongoing feud with Google – has not offered users the same option which is a major turn-off for younger consumers who are placing increasing importance on integrated entertainment systems.

The second reason for Netflix’s continuing success is its high levels of self-investment. The company put out 1,000 hours of Netflix Originals (in-house) media in 2017 alone and many of the most popular shows – House of Cards, Orange is the New Black, Black Mirror – have come from Netflix’s in-house production teams. The company has built a solid reputation for creating award-winning and critically-acclaimed shows which are making it an ever-present household name across much of the world. The fact that these shows are available exclusively on Netflix has made Netflix almost a requirement in the lives of many young people.

The final driver behind Netflix’s success is the most interesting. In the days before Netflix consumers were perfectly happy to watch one episode of a show a week, provided they managed to sit down at a particular time and day during the week. Netflix turned this model on its head by making its service truly on-demand – with tens of thousands of hours of content available 24 hours a day – and releasing many shows an entire series at a time. Binge-watching has now become an incredibly common feature of many people’s lives, and it is not uncommon for consumers to watch an entire season over a weekend. In fact, it is now viewed as unusual when consumers have to wait a week to see the next episode of a show. Netflix has managed to create this environment almost entirely alone, and it has greatly increased the likelihood of viewers being tempted in to new series given how much longer they spend using the service.

Overall Netflix has done an excellent job establishing itself in a growing market, and adapting the market demand to suit its own needs. Its constant self-investment has developed it into a household name known for producing some of the greatest TV shows of the decade. While the company’s subscriber growth may have slowed somewhat in recent years the company is well-established and unlikely to falter any time soon.

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