Author(s): Raghu Gopal
Founded more than 20 years ago, Netflix has disrupted the global broadcasting industry in a profound way. In doing so, the company has gained a significant lead over slower competitors, making it very difficult for traditional media companies, or even major technology companies, to catch up.
Netflix now has 125 million subscribers, having gained 26 million new subscribers for its streaming service during the past year. In the US, Netflix has already signed up about half of all households that have fast Internet service.
It was just over two years ago that Netflix rolled out its international expansion to cover 190 countries — almost every nation on the planet, with the notable exception of China. Slowing growth in the US had led the company to focus on international growth (see Netflix Goes Bollywood).
Netflix's rapid international expansion has been fantastically successful and is now powering the company's growth. The vast majority of new subscribers in the first quarter of 2018, about 5.5 million of the 7.4 million added during quarter, came from outside the US.
And all this subscriber growth comes before a new tie-up with Comcast's cable subscriptions that could swell the Netflix audience even more. Last week, the company announced a partnership with Comcast to bundle its service with Comcast's cable TV and Internet plans. Netflix struck a similar deal with European pay-TV operator Sky in March (see Instant Insight: Sky Offers Netflix Bundle). The firm has also bundled its service with wireless carrier T-Mobile and previously offered access to Vodafone subscribers.
Netflix has been investing heavily in its proprietary content to lure new subscribers to its platform and keep existing ones. The company expects to spend up to $8 billion on original content in 2018, more than rivals like HBO and Amazon. During the first quarter of this year, Netflix launched 18 original series and 14 new original movies. The line-up included a new season of Jessica Jones, a reboot of Queer Eye and the launch of a talk show hosted by David Letterman, which kicked off with an interview with former US President Barack Obama. Netflix expects to have 700 new shows available for customers in 2018. Although the company increased prices last year in numerous countries, it continues to attract new subscribers.
Yet despite — or because of — its recent media dominance, Netflix has to face greater competition. Rivals such as Amazon and Disney are developing their own video streaming services. In the case of Disney, there is a direct conflict with Netflix: Disney will stop supplying new movies to Netflix, as its streaming service for families will compete directly with Netflix. And Amazon is ready to plough as much as $1 billion into a single TV show. Apple is ramping up its investments in original content. Even Facebook is pushing deeper into video content.
However, despite the increasing competition, we believe Netflix's focus on content and partnerships makes it very difficult for competitors to catch up. It will take a new level of innovation and irresistible content to counter the global momentum of Netflix.
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