Netflix, the video streaming service established in 1997, now boasts 125 million subscribers worldwide. The company added 7.4 million subscribers during the first three months of 2018 alone, according to Netflix's letter to shareholders.
Netflix now operates in 190 countries while its international business adds to a record bottom line worth $290 million in the first quarter of 2018. Year-over-year growth is impressive as net profit in the same period of 2017 stands at "only" $178 million.
Why Netflix's Profits Matter?
Netflix competes directly with broadcasting and cable TV companies for both viewers and advertisers' budgets. Their performance is a major indicator where the marketing industry is heading as well.
Having just above 20 million memberships in total in 2012, of which only a couple of million international subscribers, the video on demand service now has more subscribers than many established TV companies.
Multi-channel cable and satellite TV companies such as Comcast, DirecTV, Charter, DISH, Verizon FIOS and AT&T U-verse have less combined subscribers than Netflix alone. Other video streaming companies like Hulu also boast more subscribers compared to Charter or DISH. You should add about 26 million subscribers of Amazon prime video services in the U.S. to get the complete picture.
SVOD Providers Invest in Original Shows
Video streaming services are not a substitute for original shows anymore. All of the mentioned video-on-demand services - Netflix, Hulu and Amazon Prime - are investing in shooting their own shows.
Netflix have their "Orange Is the New Black", "Unbreakable Kimmy Schmidt", "Stranger Things" and "Master of None" series. Hulu streams the "The Handmaid’s Tale", "Casual", "Difficult People", "Runaways" and "Future Man". Amazon offer to their viewers "The Marvelous Mrs. Maisel", "Patriot", "Sneaky Pete", "Catastrophe" and "One Mississippi".
One important trend to watch: Between 22 percent and 37 percent of SVOD subscribers are watching original shows, not rewinds of non-original shows.
Consumers in the United States spent some $9.55 billion on SVOD in 2017, over two times more than the $4.72 billion spent on DVD and Blu-ray in the same period. It is the first time ever, spending on video streaming services is exceeding spending on traditional video services but there will be many more "first times" as digitization becomes norm.
Digitization and Personalization
On-demand video streaming services offer greater rationalization, which is of growing importance across all industry verticals where the main product is content. Consumers want customized content and personalized experience, which in the most cases includes non-linear video services as opposed to traditional linear TV.
Interactivity and personalization will also play increasing role in any viable content marketing strategy for the future. Services like Netflix already provide complete customization of any home page one of their subscribers is using. It is not technically difficult to personalize one such page and machine learning algorithms will make it better and more convenient to use over time.
At the rate at which SVOD services are adding new subscribers, traditional entertainment companies such as TV networks and broadcasting companies will need to invest very heavy in transition to new business models if they are to retain both their competitiveness and subscriber base. Switch to non-linear video content is unavoidable, which will also impact the entire advertising and video marketing industry.
One thing is for sure, the trend toward increasing use of video on demand streaming over linear video formats will steadily accelerate in 2018 and the years to come.
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