Netflix: [Binge] Racing to the top

Well, there’s Netflix, and then there’s everybody else.” We find we’re increasingly hearing – and saying – these types of statements. This week, Netflix announced its third quarter earnings, including net subscriber growth that exceeded its projections by nearly 1 million subscribers, bringing its total to 104 million paying subscribers globally. In this week’s mailer, we explore four interesting highlights from this week’s news:

 Netflix unveils the Binge Racer:

Perhaps more intriguing than its continued growth story, Netflix also revealed a new type of viewer, the Binge Racer, defined as a fan who completes an entire season of a Netflix show within 24 hours of its release. Worldwide, Netflix identified over 8 million members who have Binge Raced.

Canada, the US and Denmark are the top three countries for Binge Racing, based on the percentage of members who are Binge Racers. The UK rates 12th – given Ofcom’s recent statistics about bingeing in the UK, we think we can do better! Are you a Binge Racer?

Netflix continues to shift its business model from aggregator to content producer:

Last year, Netflix announced its intent to spend at least 50% of its content budget on original content in the next few years. Netflix estimates it will spend $7 to $8 billion on content in 2018 – more than Disney’s ESPN, Ben Thompson of Stratechery writes.

The more Netflix spends on owned, exclusive content, the more it builds up a catalogue of evergreen content that can continue to attract and retain audiences for years into the future. While much was made of Disney’s announcements to remove its content from Netflix after current agreements expire, Netflix is increasingly becoming self-reliant and no longer beholden to the content owners whose catalogues previously enabled it to grow.

As Netflix writes in its Q3 shareholder letter, Our future largely lies in exclusive original content that drives both excitement around Netflix and enormous viewing satisfaction for our global membership and its wide variety of tastes.”

Furthermore, as Ben Thompson also writes, when companies such as Disney offer their content direct to consumers, Netflix does not see that as competition; rather, that it can encourage cord-cutting, which can only help Netflix:

Netflix is arguing that companies like Disney going over-the-top are, in fact, helping Netflix. Sure, they are competitors if you only consider streaming, but if you back out to consider entertainment broadly, then more OTT services actually mean a higher likelihood of cutting the cord. And, if a customer cuts the cord, which service has the highest likelihood of being in the OTT basket they ultimately pay for? Netflix, of course. To that end, if Disney makes it easier to cut the cord, the better for Netflix.

Netflix is becoming one of the biggest movie studios:

In 2018, Netflix plans to release 80 original movies. As Quartz smartly observes, that would be significantly higher than many major movie studios released last year, such as Disney (13), Lionsgate (24), NBC Universal (33) and Sony (38).

Importantly, Netflix isn’t releasing its movies in theatres, despite the top-tier theatrical talent attached, such as Martin Scorsese and Will Smith. This gives Netflix much more freedom around release schedules and allows Netflix to avoid significant theatrical marketing spend.

Nielsen adds Netflix to its TV measurement in the US:

Nielsen announced its new Subscription Video On Demand Content Ratings in the US, which will purportedly give clients data about how shows on Netflix perform relative to broadcast TV shows. For example, this should allow clients to compare the latest Stranger Things episodes with the MLB playoffs or Game of Thrones.

Nielsen will collect this data via its panel of 44,000 households across the US, but will only capture connected TV viewing, which Adweek reports is around 75% of viewing, according to services like Hulu. Without mobile and tablet viewing, how confident should one be about these viewing figures?

Netflix, known for being secretive about its own viewing figures, has already disputed Nielsen’s ability to provide this data accurately, stating: The data that Nielsen is reporting is not accurate, not even close, and does not reflect the viewing of these shows on Netflix.”

Nielsen has already signed up clients including A&E, Disney, NBCUniversal, Lionsgate and Warner Brothers, demonstrating that everyone wants to know as much as possible about how Netflix’s content performs, given their outsized investments.

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If you are interested in talking more about our vision for the future of TV and video content, or want to know what our favourite Netflix shows are to binge-race, please do get in touch, or sign up for our weekly mailer to see what we’re thinking about each week.

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About Mike Newman

Mike Newman is a Consultant at MTM. He is interested in how technology is changing the way we interact with each other and consume media, with a particular focus on music, sports and all things bleeding edge