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Netflix on a Global Social Roll
Posted on December 13th 2013
My vote for comeback story of the year? Netflix, Inc.
After nearly self-imploding in 2011, Netflix (NASDAQ: NFLX) has seen a 10% rise in corporate earnings, the addition of more than 2.7 million subscribers across the globe, and its stock trading at $363 per share in Q3 2013. One of the best industry turnaround stories ever, the darling of the S&P shows Netflix total subscriber base is 40.4 million worldwide—a 229% increase in one year.
The Netflix comeback is a remarkable, albeit cautionary tale. Just two years ago, after its CEO Reed Hastings made an erratic management decision to split the company and raise streaming prices (with what appeared obvious disdain for his brand’s loyalists), consumer outrage erupted on- and offline An insurrection staged by brand loyalists and their minions in the social metasphere and the reported loss of 800,000 customers brought the company to its knees. Brand value plummeted. Stock value crashed by 70% overnight.
But like all good turnaround stories, things changed. First, the company moved further into the international market, which now includes presence in Canada, the Caribbean, Mexico, Central and South America, the United Kingdom, Ireland, Sweden, Denmark, Norway, Finland and the Netherlands. And sites are set on Germany and France to expand its European presence. According to Netflix projections, this international expansion will account for 80% of the company’s future growth.
Next, Netflix hinged its bets on producing original content and winning aggressive content deals. The bet paid off in 2013. Big time. Netflix and its viewers welcomed such critically acclaimed series as House of Cards, Orange is the New Black and Arrested Development to its content portfolio.
Results of our NetBase social media analytics platform confirm that consumers have rekindled their love affair with Netflix. French and Spanish-speaking subscribers, as well as viewers in other global markets, resoundingly applaud the bold and successful move into original content. Over time, the NetBase social analysis of Netflix has shown that subscribers are clearly still emotionally invested in the company, which has been strengthened by their affinity with the brand’s original content value proposition.
Now comes the “cautionary” part of the Netflix tale. There is speculation that competitive challenges to come could impede the continued meteoric rise of Netflix, perhaps even implode its stock market euphoria. Future competition, for example, from deep-pockets like Amazon—assuming they continue their product “alchemy”— which paid Viacom approximately $200 million to license old TV classics like I Love Lucy and more contemporary CSI crime drama episodes.
While the pinnacle positioning of Netflix in the industry is an envious one, it is not one immune to competition. To maintain its momentum and market share, Netflix will have to ward off the Amazons of the world, as well as other forms of competition that include the consumer mindshift converting to a sharing model and a quantum shift from a license-based economy to a subscription-based one, wherein content owners—networks, studios and software developers alike—are beginning to reap untold profits.
So as the streaming war heats up and changes in our global subscription economy continue, tracking consumer passion within the social metasphere will prove an interesting ride in 2014.