How Netflix netted 200 million subscribers
Popular shows like The Crown are helping to drive revenues and profits - but the competition is also growing
A night in front of the box binge-watching Netflix has become a ritual for millions of people during Covid-19 lockdowns - and hit series such as The Crown and Bridgerton have helped the streaming service soar to new heights in the past 12 months.
The latest financial report from the California-based firm reveals that Netflix now has more than 200 million paid members, up by more than 30% from 2019.
Indeed, after being founded in 1997 as a “rental company that sent DVDs in the mail”, Netflix is now “one of the most influential companies in Hollywood”, CNN says.
Here we look at what is driving the success of the popular streaming service - and the challenges it faces to retain market dominance.
Subscribers, profits and revenues soar
It’s not just the viewers enjoying Netflix, but also investors. The company ended 2020 with a total of 203.6m subscribers after gaining 37m over the year, including 8.5m in the final quarter alone.
“The additions - as well as price increases in the US, UK and elsewhere - helped revenue rise 24% in the most recent quarter to $6.6bn (£4.8bn), while profit hit $542m,” the BBC reports
For the full year, Netflix achieved total revenues of $25bn (£18.2bn) - up by 24% - while operating profit grew by 76% to $4.6bn (£3.3bn).
And the streaming giant is expected to gain another six million new subscribers in Q1 2021. That compares with 15.8m people who signed up in Q1 2020, but as the company points out, the previous gains were a result of “the impact from the initial Covid-19 lockdowns”.
Netflix said: “For FY21, we’re now targeting a 20% operating margin, up two percentage points from 2020 and higher than our previous 19% forecast, due to a more favorable revenue outlook.”
Following the release of the last quarter earnings, the company’s stock “jumped as much as 12% in after-hours trading”, CNN reports.
Original content is king
Netflix Originals - TV shows and films - are a key driver for new subscribers. In its scripted English language programming category, season four of The Crown proved the most popular in the last quarter.
“In its first 28 days, more member households chose to watch season four of The Crown than each of the prior seasons, helping to grow the number of member households that have chosen to watch this series to over 100m since its initial launch,” Netflix said.
The service has also scored a hit with Bridgerton. The first series of the period drama was released late last month and has proved “immensely popular”.
In fact, Bridgerton is projected to amass more than 63m household views in its first four weeks on release, The Verge reports - which would make it Netflix’s fifth most-watched series to date.
In the original films category, The Midnight Sky, starring and directed by George Clooney, was the most popular Netflix title of the last quarter, with an estimated 72m member households tuning in to watch the sci-fi drama in the 28 days following its release in early December.
The Queen’s Gambit was another big winner for Netflix, attracting 62m member households - making the coming-of-age drama the biggest limited series in Netflix history.
The popularity of such shows saw Netflix dominating the streaming market. According to Google’s 2020 global year in search, Netflix series accounted for nine out of the ten most searched shows, and claimed the top spot with Tiger King.
‘Breaking national barriers’
It’s not just original English language titles that are proving to be a big success. Netflix shows are “increasingly breaking national barriers”, says the BBC. More than 80% of new subscribers came from outside the US and Canada, and Europe was the region for the most new members.
Since its release in early January, Lupin, an “adrenalin-filled” French language heist series, has hit No.2 in Netflix’s US Top 10 list and ranked No.1 in countries including Brazil, Argentina, Germany, Italy, Spain, Poland, Vietnam and the Philippines. Netflix projects 70m member households will choose to watch Lupin in its first 28 days of release.
After disruptions to filming as a result of the Covid-19 pandemic, Netflix says production is “back up and running” in most regions. More than 500 titles are currently in post production or preparing to launch, and Netflix plans to release “at least one new original film every week in 2021”.
While Netflix is going from strength to strength, it is also being challenged by many rivals in the streaming service sector. The “bonanza of new material” that is core to Netflix's strategy has led to companies such as Disney, Viacom, HBO and others to “put more effort into their streaming offerings”, BBC says.
The big growth in streaming entertainment is something that Netflix has been “expecting for many years”.
“It’s a great time to be a consumer of entertainment,” Netflix said. “There are a wealth of options ranging from linear TV to video gaming to user generated content on YouTube and TikTok. We continue to work hard to grow our small share of screen time against these major competitors.
“These companies all recognise the future is streaming entertainment, a vision we have been working towards since inception. Our strategy is simple: if we can continue to improve Netflix every day to better delight our members, we can be their first choice for streaming entertainment.
“This past year is a testament to this approach. Disney+ had a massive first year (87m paid subscribers!) and we recorded the biggest year of paid membership growth in our history.”