Chief Content Officer of Netflix, Ted Sarandos, has recently released a statement about how the company plans to invest more money into new content for the streaming service. Last year, Netflix spent a whopping 6 billion dollars in original content. Although before insisting on a bigger budget for more projects, he wanted to review the second quarter of Netflix subscribers.
Previously, Sarandos estimated for the second quarter that Netflix would bring in over 500,000 new U.S. members, but instead his predictions were too high and only had 162,000 new subscribers.
Many employees at Netflix are issuing blame game against the company’s tactics. Some employees say numbers are down because of the media’s negative marketing of Netflix’s service price increase. Although the hike itself was tolerated by a lot of current Netflix customers since most users who have had the service for years decided to keep their subscription.
Another big worry is new Netflix subscription members internationally has been low as well. The recent price increase was only available for a certain amount of international countries, yet their numbers still stay stagnate. Over 1.5 million people have signed up for Netflix internationally (countries outside the U.S), when Sarandos and other employees estimated to have 2 million international subscribers to their roster.
Economists predict that Netflix has another year to gain more subscribers to meet their high investment goals for original content. Usually, throughout the years, Netflix has invested about 3 to 5 billion yearly for original content and their business practice has worked well.
Netflix’s streaming revenue has actually increased 30-35% per year, but with this low amount of new subscribers, Netflix might have to decrease their spending habits.
Netflix over the past two years has spent over 85% of its international revenue on international content commitments and 35% of U.S. profits on domestic content commitments. If international revenue continues to slow down with its lack in subscriptions, Netflix might have to use all their yearly revenue just to pay for new content licensing fees.
Netflix’s team still thinks that it is too early to panic yet, assuming that business internationally and domestically will pick up soon. Although should they be worried? Or should they take early measures, like investing in less new content, if the trend of less new subscriptions stays for good?
