Netflix has enjoyed remarkable growth these past few years. Hollywood has welcomed the OTT player as a fresh window for sales of its back catalogues, and the investment community has backed Netflix’s rocketing share price as success bred confidence in the narrowcaster’s business model.
But Netflix is now beginning to face tougher headwinds if a report from MoffettNathanson is any guide. The report praises Netflix for its “remarkable job navigating their way around potential pitfalls and landmines in building the company’s content offering”.
The 15-page report shows how Netflix’s revenues are growing spectacularly, from $5.5 billion last year to a forecast $9.5 billion in 2017 (and operating profits of some $900m in 2017). This growth is being maintained by better-than-expected subscriptions, and new market launches. Netflix is now in 50 countries, and predicts “material global profits from 2017 onward”. It will launch in Japan this autumn.
However, the likes of Hulu and Amazon, as well as competitive initiatives from existing regional players and pay-TV operators, are not giving Netflix a free hand in its plans.
MoffettNathanson says that Netflix will invest heavily this year, tripling its number of original productions to 320 hours, and complete its global expansion within the next two years. By moving up the “food chain” and moving away from being an aggregator of second window content into a primary maker of original content, this will “differentiate itself in an increasingly competitive environment for original content,” says the study. Moreover, Netflix is fast developing its relationships with talent agents, writers and producers.
All of which means that its rivals are also toughening up their responses. Both Amazon and Hulu are also enjoying successes in original production (‘Transparent’ from Amazon) while Hulu is at least trying to tap into its existing relationships with 21st Century Fox and Disney for more original content
MoffettNathanson is a tad sceptical of Netflix’s “320 hours” of original productions, and suggests that their own count amounts to near 285 hours, but admits that the target terms is loosely applied, and the year is far from over.