How Netflix Is Winning Subscribers

By Aarthi Rayapura November 9, 2016

By Jaewon Kang

The widely anticipated release Friday of The Crown on Netflix (NFLX) once again underscores what its marketing strategy largely hinges on: original content.

The production reportedly cost $130 million, or $13 million an episode, making the show about a young Queen Elizabeth II one of the most expensive ever.

With user growth still a key metric for Netflix, the marketing strategies of the video streaming service and how it is adding and retaining subscribers both domestically and internationally have attracted attention. Rather than turning to traditional marketing channels, Netflix has relied on word of mouth for its top-quality original content — a strategy that industry observers say has fared well. Still, as the company looks to emphasize markets overseas, Netflix may have to start thinking creatively.

Historically, Netflix hasn’t made substantial marketing or advertising expenditures, according to Michael Goodman, director of digital media strategies at Strategy Analytics.

“Frankly, it’s a big word-of-mouth company,” Goodman said. Netflix’s third-quarter results, for instance, were largely lifted by success of Stranger Things and Narcos.

“They do some social, and they certainly do some digital advertising. You’ll see their banners pop up,” he said, adding that the media coverage on Netflix’s content also has become a major avenue of marketing for the Los Gatos, Calif., company.

For instance, when Netflix originals score Emmy nominations, media coverage creates appetite for subscriptions, according to Goodman.

In fact, Netflix has been touting its content as its main distinguishing factor.

When asked at the 25th Annual Goldman Sachs Communacopia Conference in New York in September how Netflix views Alphabet’s (GOOGL) YouTube, its growth and its investments in content, Netflix CFO David Wells said there’s “nothing” the company would do differently.

“We’re just going to continue to focus on making our services great, adding a lot of content and building that out,” he said.

Netflix, which has been on a multiyear transition and evolution to more of its own content — it plans to release more than 1,000 hours of original programming in 2017, up from more than 600 this year — will continue to strive for a 50-50 balance between original and licensed content, Wells said at the conference.

Original content also is playing a significant role in the company’s efforts to gain more international subscribers. But Netflix’s marketing strategies depend heavily on the geographic market, according to Joel Espelien, a senior adviser at TDG Research.

 

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And check out Zuora CEO Tien Tzuo’s piece – Netflix and the Six Billion Dollar Bet!