GM Thought of the Week – The challenges behind the growth of Netflix
After exceeding its international subscriber growth target this week, Netflix’s share price rose. Subscriptions grew by 7.41m in the first quarter versus analysts’ expectations of 6.5m.
International growth was key to Netflix’s success in Q1 due to heavy investment in original content which brings in new subscribers. Investment in existing programming, such as Stranger Things 2, minimises churn as people are keen to keep up with their favourite shows.
The strength of the content streaming giant does provide us with some challenges to overcome, both for us as advertisers and the clients that we support.
Netflix and its competitor counterparts, such as Amazon Prime, are contributing to the shift away from linear TV viewing. With a lack of transparency from Netflix on their viewing performance, the market has struggles to accurately determine the full extent of the impact on viewing. But what is undeniable is the correlation between impact decline on TV versus increased subscriptions and time spent on Netflix and its counterparts.
The lack of transparency also causes another dilemma for our clients. Netflix is increasingly focused on licensing of their owned content within their business model.
Looking at the kid’s space in particular, they have a number of owned properties that are gaining traction and a scalable fan base. With a large portion of the toys and games market being driven by licensed products, there is potential for Netflix to offer lucrative deals for clients to use their own characters to appeal to children.
What is unclear however is whether the scale of awareness and loyal viewing for shows such as Spirit is set to rival that of the traditional TV counterparts to effectively drive sales.
To overcome the lack of transparency for both share of viewing and license performance, Generation Media, along with a number of key stakeholders, have commissioned ongoing research to measure children 2-9 years video consumption in real time. ‘Kids and the Screen: Changing the Channel,’ bi annual study conducted by Giraffe Insights, provides clarity on not only how children are splitting their video viewing time but also what content they are choosing to engage with. Please get in touch for more information.
Lisa Morgan, Managing Director