After a deflated third quarter, Netflix surges back with strong growth

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If you needed confirmation that we live in an online world where people stream their TV shows instead of watching them via traditional television broadcasts, Netflix’s results last week are the definitive proof. Delivering killer quarterly results, Netflix said it had Q4 revenue of $2.48bn and added 7m new customers, of which 3.7m were outside of its United States home market.

Netflix now has 93.8m subscribers, which has grown by 19m last year alone. Last January Netflix’s announcement that it would launch itself into 190 countries around the world overshadowed much of the other news from the Consumer Electronic Show.

It appears to be working, as the results gave Netflix its best-ever quarter in its 19-year history,

Netflix’s secret has been to evolve its business model. Until the last few years, it was the repository of previously-aired TV shows and movies. It was the archive, as it were, of other channels’ shows, but didn’t have anything current on.

But the largest streaming service in the world had an important realisation that it would forever be beholden to other television companies if it did not evolve into making its own content. And it has done so with aplomb.

From House of Cards to Stranger Things, Orange is the New Black to Narcos, The Expanse to The Crown, it has proved adept at original content that is broadly appealing. Better yet, its appealing to its increasingly non-US market. Already 47% of Netflix’s subscribers don’t live in the US.

“To be a successful global service, we need to be more than Hollywood to the world,” CEO Reed Hastings told Bloomberg BusinessWeek for last week’s cover story: “We need to be a company that shares stories from all around the world.”

Netflix intends to spend $6bn this year making its own original content, up $1bn over the previous year, having won 146 awards from 707 nominations in total, including 13 Emmys, the Golden Globes and wins for documentaries from the respected Peabody Awards. Sleeper hit The Crown saw Claire Foy deservedly win the Best Actress TV Series – Drama award at this month’s Golden Globes. John Lithgow, whose blisteringly good portrayal of Winston Churchill earned him a nomination for best support actor, lost out to Hugh Lawrie, equally a class act. Then there’s the runaway hits Narcos and 3%, respectively in Spanish and Portuguese, both with some English, that are proving popular all over the world.

Netflix is making good, compelling television. As Bloomberg wrote, “it’s like a worldwide Marshall Plan for premium home entertainment”.

After all, Netflix practically invented binge-watching, the Collins Dictionary’s word of the year in 2015, and bucks the traditional trend of shows being updated weekly by releasing all the season’s episodes at the same time.

Last year it began offering the option to download shows, something its much smaller African rival ShowMax has offered for a while, understanding how lack of connectivity, and its high price, means the ability to download a show onto a mobile device at work to watch later, is a market-appropriate way to reach potential customers.

In Brazil where Netflix took out TV adverts after its launch in 2013 to convince local views it was a serious company, the advert’s payoff line was “change everything”. They certainly have.

This column first appeared in Financial Mail

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About Author

Toby Shapshak is editor-in-chief and publisher of Stuff, a Forbes contributor and a Financial Mail columnist. He has been writing about technology and the internet for 20 years and his TED Global talk on innovation in Africa has over 1,5-million views. He has written about Africa's tech and start-up ecosystem for Forbes, CNN and The Guardian in London. He was named in GQ's top 30 men in media and the Mail & Guardian newspaper's influential young South Africans. He has been featured in the New York Times. GQ said he "has become the most high-profile technology journalist in the country" while the M&G wrote: "Toby Shapshak is all things tech... he reigns supreme as the major talking head for everything and anything tech."

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