Why Netflix won't be able to get everything its way

PUBLISHED: 13:00 08 November 2017 | UPDATED: 14:31 10 November 2017

Cult Netflix hit Stranger Things

$image.copyright

CHRIS SUTCLIFFE on media

The world’s premier film and television streaming service Netflix recently went over and above industry predictions when it announced third quarter results showing it now has 104 million subscribers globally.

It added 5.3 million subscribers in the past quarter alone, and predicts it will add another 6.3 million in the final quarter of the year on the back of the debuts of shows like David Fincher’s Mindhunter, Marvel’s The Defenders and the second season of cult phenomenon Stranger Things.

Netflix’s messaging is that high-profile shows are such a draw for its audience that they will happily pay the raised subscription prices it is rolling out across territories. That’s why the service is investing nearly £6.2 billion into creating original shows next year, with a goal of fully half of its catalogue being Netflix-created exclusives in the near future.

Its result statement notes that as more traditionally-structured television broadcasters and even satellite and cable channels are reducing spend on content in the face of competition from over-the-top (OTT) digital services like, yes, Netflix, a strong catalogue of original shows could be the point of differentiation that keeps them ahead of the competition.

But behind that explicit optimism lies a few tacit truths about the real reason Netflix is investing in more original content, and while those results make Netflix look unassailable, there are a few potential roadblocks that might halt its march to absolute streaming dominance.

'The first is that the company has $4.8 billion in debt and liabilities. However it also has a further $15.7 billion in streaming obligations and, crucially, future content expenses. That’s not as much of a problem as it appears at first blush: much of that debt is as a result of its forays into original content.

 

As the old adage goes, you have to spend money to make money, and its latest results show that its overall revenue for the quarter was up 30.3% year-on-year. In the short-term at least, Netflix is going to be fine for cash.

The second is that Netflix’s viewing figures aren’t readily accessible. Since it doesn’t sell advertising, it has no impetus to share that information, but it is currently in a spat with audience data information provider Nielsen over how many – or few – people actually watch its original series.

The third, more fundamental threat to Netflix’s existence might well be its own success. As the company grew from a mail-order DVD rental service to the de facto ruler of the streaming world, it did so with the aid of other studios and production companies who were willing to license their own films and shows to Netflix. Now that those same companies have seen Netflix’s success, they’re less willing to extend Netflix the courtesy of licensing – after all, they’d be abetting a competitor.

Earlier this year, for instance, Disney announced plans to launch its own streaming service, pulling its movies from Netflix. And other networks are likely to do the same, as Netflix’s chief content officer Ted Sarandos acknowledged in an interview with Variety in August.

But while those other players enter the streaming game they might want to consider that audiences’ cash and attention resources are limited, and that while people are far more likely to subscribe to entertainment services than news, there is still only room for a few at the top.

So Netflix’s investment in original content might be less about serving audiences exactly what they want, and more about padding themselves ahead of a shakedown in the streaming world.

You've seen the news, now discover the story

The New European is committed to providing in-depth analysis of the Brexit process, its implications and progress as well as celebrating European life.

Try 13 weeks for £13

Support The New European's vital role as a voice for the 48%

The New European is proud of its journalism and we hope you are proud of it too. We believe our voice is important - both in representing the pro-EU perspective and also to help rebalance the right wing extremes of much of the UK national press. If you value what we are doing, you can help us by making a contribution to the cost of our journalism.

  • Become a friend of The New European for a contribution of £48. You will qualify for a mention in our newspaper (should you wish)
  • Become a partner of The New European for a contribution of £240. You will qualify for a mention in our newspaper (should you wish) and receive a New European Branded Pen and Notebook
  • Become a patron of The New European for a contribution of £480. You will qualify for a mention in our newspaper (should you wish) and receive a New European Branded Pen and Notebook and an A3 print of The New European front cover of your choice, signed by Editor Matt Kelly

By proceeding, you agree to the New Europeans supporters club Terms & Conditions which can be found here.



Supporter Options

Mention Me in The New European



If Yes, Name to appear in The New European



Latest Articles

Podcast

ANTI-BREXIT EVENTS

Grassroots anti-Brexit campaigners are increasing the pressure on politicians ahead of a series of important votes this year. Here is a list of the events organised across Britain in the coming weeks and months.

Trending

Newsletter Sign Up

The New European weekly newsletter
Sign up to receive our regular email newsletter

Our Privacy Policy