David Olive: Netflix does just one thing. That’s why it’s winning — in the market and on Oscar night
|Toronto Star 08 Apr 2021 at 09:19|
It will be Netflix Inc ., king of the streaming services, whose original movies have amassed 37 Oscar nominations, the most of any producer, including best-picture nominees “Mank” and “The Trial of the Chicago 7.”
And at this year’s Golden Globes, Netflix movies and TV series earned the most nominations (42) and won 10 awards — the year’s largest haul.
But that’s just one chapter in a Netflix playbook that recommends itself to strategic planners in other industries.
In 2020, Netflix handily survived its first full year of competing with a new onslaught of deep-pocketed streaming rivals that launched in late 2019 and early 2020.
Netflix ended 2020 with a record 203.7 million subscribers, adding 37 million subscribers last year despite fierce competition.
The pioneer streamer did not sacrifice financial performance to maintain its industry lead against about a dozen newcomers. Instead, Netflix posted a 23 per cent gain in revenues in 2020, to $24.9 billion (U.S.), and a 47 per cent increase in profits, to $2.8 billion. (All figures in U.S. dollars.)
Netflix didn’t drop its prices to match the discount pricing of its new competitors. Instead, it raised the monthly fee for its most popular subscription plan, to $13.99. That’s a big premium over the $7.99 charged by Walt Disney Co.’s Disney Plus, Netflix’s closest rival.
Pricing is an art form. If you believe in your product, you resist price-cutting, even in a market-share contest. It could diminish your product’s image and alienate customers locked into earlier, higher prices.
Of course, you can’t let others underprice you unless you have the most sought-after products. The truism that “content is king” applies here.
All streamers have access to the same means of getting their shows to audiences. So the winners in this contest are those offering the most compelling shows, and the largest number of them.
At this writing, Netflix has more than 500 titles in post-production or ready to launch in more than 190 markets worldwide. In movies alone, Netflix will release a new picture every week this year. That rate of production comes close to matching the Hollywood studios in their Golden Era.
Early surveys of viewing habits show Netflix with a much higher subscriber-retention rate than its competitors.
Netflix develops its programs further in advance of release than movie studios, TV networks, cable channels and other streamers.
That’s how Netflix benefited more than most other streamers from the pandemic boost in streaming subscriptions. Netflix is unrivalled in the quantity of fresh content it offers its subscribers. It is the new-product development leader in its industry.
That’s not to say it will continue to dominate streaming. Its rivals include some of the largest firms in Big Tech (Apple Inc., AT&T Inc., Amazon.com Inc.) and in Hollywood.
The latter are endowed with huge libraries of classic Disney, Paramount, Warner Bros., Universal and Twentieth Century Fox pictures, with which they can attract subscribers. That’s in addition to the new content they have the enormous capital needed to produce.
From a standing start in November 2019, Disney Plus has built a subscriber base of about 100 million customers and is aiming for 260 million by 2024.
But Netflix has won the first round in the streaming revolution. It still has about twice as many subscribers as Disney Plus, and Netflix alone accounts for almost one-fifth of a global streaming audience that was reported last month to have surpassed 1.1 billion subscribers.
And in a worrisome sign for its competitors, Netflix says it expects to become cash-flow positive this year. The investor knock against Netflix has been its voracious appetite for debt to finance its expansion.
That phase has passed, however. Netflix is now so well-financed that it is giving thought to returning cash to investors through share buybacks.
Eventually, at least some of Netflix’s competitors will learn how to get their shows in front of eyeballs as quickly as Netflix does.
But that won’t happen easily or soon.
Neither will overcoming Netflix’s head start in international markets or adopting its unorthodox pursuit of exclusive rights to stream content produced by others worldwide.
Netflix took a Canadian series, “Schitt’s Creek,” and made it an international sensation. It rescued the series “Cobra Kai,” now a hit in its third season, from YouTube obscurity.
The firm made its French crime drama series “Lupin” a hit across its entire platform. And grasping the centrality of matrimony in Indian culture, Netflix has streamed its hit series “Indian Matchmaking” for the world’s single biggest viewing audience.