Netflix finally learns the oldest rule in Hollywood: Hits matter

Netflix is dramatically upping its content material spend in 2021—to $17 billion—signaling that it will likely be making extra bets on large motion pictures and TV reveals because it fights to fend off rivals like Disney Plus and HBO Max. Whereas the latter have built-in entry to fashionable franchises like Star Wars and Surprise Lady attributable to their Hollywood studio dad and mom, Netflix has had to purchase its method into the franchise enterprise. It not too long ago made a take care of Sony to develop into the streaming residence to Marvel movies resembling Spider-Man and Venom, and it paid $465 million for the two sequels to Knives Out, the whodunit thriller starring Daniel Craig. As co-CEO Ted Sarandos stated on an earnings name on Tuesday, “large occasion content material” is essential to the firm’s technique going ahead.

Certainly, these large bets on recognized movie entities (up till now, Netflix had primarily splurged on TV showrunners resembling Shonda Rhimes, whose first large undertaking, Bridgerton, was considered one of the few brilliant spots for the firm up to now in 2021) are prone to proceed as the streamer wades into ever-more aggressive territory and tries to take care of the momentum it loved in 2020 as COVID-19 stored individuals strapped to their couches. On the earnings name, Netflix introduced that its subscriber development was slowing this 12 months: In the first quarter, it added almost 4 million subscribers, wanting the 6 million it had projected. The information despatched the firm’s inventory falling in after-hours buying and selling, down 11%. 

Netflix’s earnings and income projections really beat Wall Road’s projections, and CFO Spencer Neumann stated the subscriber slippage “boils all the way down to COVID, frankly,” and the incontrovertible fact that so a lot of Netflix’s productions had been shut down attributable to the world pandemic, inflicting delays. That created “some short-term choppiness in a few of the enterprise developments,” Neumann stated, emphasizing that the second half of 2021 would see extra launches of main TV and film titles to draw new subscribers. 


Amongst the anticipated releases for 2021 are new seasons of Cobra Kai and The Witcher, in addition to the Netflix authentic movie Red Notice, starring Dwayne Johnson, Ryan Reynolds, and Gal Gadot, in addition to Extraction 2, starring Chris Hemsworth.  

However with Amazon spending almost $500 million on only one season of The Lord of the Rings, and Disney Plus collection like The Mandalorian and WandaVision sucking up oxygen in the streaming verse—in keeping with a current study by Parrot Analytics, the two reveals had been the most in-demand digital originals in the first quarter of 2021—Netflix must transcend the authentic content material sport. It must wade deeper into the mental property sport, i.e., the hits enterprise, therefore the offers with Sony and Lionsgate (proprietor of Knives Out). “The truth that we are able to do very large-scale viewers motion pictures at the identical degree as the ones being produced and being made for theaters is an increasing number of significant to viewers,” Sarandos stated.

As for the Sony deal, which kicks in subsequent 12 months and likewise permits Netflix to provide authentic movies from Sony’s library and improvement slate, Sarandos famous, “It provides us entry to IP that we wouldn’t in any other case have.”  

To pay for this and different main content material investments, Netflix is upping its content material spend this 12 months a whopping 44% from 2020, when it spent $11.8 billion on content material. In 2019, Netflix’s content material spend was $13.9 billion. 

For now, nonetheless, Netflix’s hit checklist feels extra boutique than blockbuster. The corporate stated that its most-watched reveals throughout the first quarter of 2021 had been Firefly Lane, which drew 49 million households throughout the collection’ first 28 days on the service; the third season of Cobra Kai (45 million); Destiny: The Winx Saga (57 million); and Ginny & Georgia (52 million). As for movies, viewers streamed Exterior the Wire (66 million); Sure Day (62 million); I Care a Lot (56 million); and the final installment of To All the Boys I’ve Liked Earlier than.

Native language initiatives additionally drew eyeballs, with the French collection Lupin drawing 76 million households throughout its first 28 days on Netflix. 

Throughout the earnings name, Reed Hastings, cofounder, chairman, and co-CEO, downplayed the concept that Netflix, which now has greater than 208 million world subscribers, is dealing with any new competitors from streamers like Disney Plus, saying that Netflix’s largest competitor is linear TV, adopted by YouTube. 


“Disney is significantly smaller,” Hastings stated, smiling. “We’re type of in the center of the pack.”