David Farnor | On 18, Jul 2017

Netflix has come of age this year, as the streaming service has smashed through the 100 million barrier for global subscribers.

The streaming service was founded 20 years ago, before the idea of streaming video on a mass scale was even on the horizon. In Q2 2017, it saw its number of customers soar from 99 million to 104 million – a higher then forecast number of acquisitions.

Total global additions reached 5.2 million in Q2 2017, compared to its forecast of 3.2 million, bucking the usual seasonal patterns. Over the first six months of 2017, Netflix has seen its membership surge 21 per cent year-on-year, with 10.2 million new customers. Domestic sign-ups totalled 1.1 million in the three months to June 2017, the highest level of Q2 additions since the second quarter of 2011 – and that is forecast to continue with 0.75 million members added in Q3 2017, compared to 0.37 million added in the same period o 2016.

This year’s stellar performance, though, marks more than what CEO Reed Hastings calls “a good quarter”: this is the first time that Netflix has more international customers than domestic subscribers. Membership from outside of the US accounts for 50.1 per cent of Netflix’s total membership base, with international revenue rising 57 per cent year-on-year, as its business model begins to pay off in both reach and scale.

That is fuelled, of course, by its investment in original content and local productions worldwide. In Q2 2017, Netflix’s Spanish-language original Ingobernable, starring Kate
del Castillo, was viewed by millions of members outside of Mexico, while its first original from Spain, Las Chicas del Cable (Cable Girls), attracted “significant viewership in the US and throughout the entire Spanish-speaking world”. In 2017, Netflix premiered 23 original shows (including seven for kids), 13 comedy specials, six documentaries, and nine original films. The days of just premiering House of Cards have long gone.

House of Cards and other old favourites are still around, though, and have become part of the established TV industry: the political drama was one of Netflix’s series nominated for a best series award at the 2017 Emmys.

But as Netflix reaches 20, it has had to evolve its business strategy to balance older titles with newer commissions: where once it enthusiastically renewed every original project under the sun, Netflix now must weigh audience response with the cost of production, as getting the mix of content right is crucial to its continuing success in an increasingly crowded marketplace.

“We strive to be bold in our programming choices and financially disciplined, so we can keep being bold,” says Hastings, in a letter to shareholders. “Every show has passionate fans and committed talent striving for excellence. Sometimes those shows don’t attract as many viewers as we had hoped, compared to our other content. As much as we dislike ending a series early, it consoles us that it frees up investment for another new show, or two.”

“We are programming to please our members and we keep that as our guiding light. We love it when we support a new series that has big impact like Stranger Things, Cable Girls, and 13 Reasons Why,” he adds.

That balancing act is working so far, with Netflix earning 91 Emmy nominations this year – almost double last year’s 27 – including both new hits, such as Stranger Things, and old.

With five of the 14 total best series nominees, Netflix’s success marks not only its own maturation as a content producer and provider, but also the sheer impact it has had upon the entertainment world at large.

“Creating a TV network is now as easy as creating an app, and investment is pouring into content production around the world,” says Hastings.

“In addition to the many SVOD players around the world (Blim, Globoplay, FilmStruck, Hooq, iflix, Stan, etc.) the large-cap tech companies, especially Amazon, are investing heavily in original and licensed content around the world. They join all the existing TV networks (BBC, AMC, NHK, etc.) of the world, and us, in bidding for great content.”

However, Netflix embraces the competition, to some degree, as it marks the ongoing shift in the overall landscape.

“We are all co-pioneers of internet TV and, together, we are replacing linear TV. The shift from linear TV to on-demand viewing is so big and there is so much leisure time, many internet TV services will be successful,” says Hastings. “The internet may not have been great for the music business due to piracy, but, wow, it is incredible for growing the video entertainment business around the world.”

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