Speaking at the INTV Conference in Jerusalem this week, Netflix’ VP of Original Content Cindy Holland spoke expansively and enthusiastically about the service. I look at four specific statements she made about the company and check to see if they stand up to scrutiny.[i]
“There is plenty of room for everyone to be successful.”: Maybe
Ms. Holland was commenting on the scheduled fourth quarter release of Disney+ and WarnerMedia services later this year. It is easy to paint a picture that shows a subscriber gain for Disney+ as a loss for Netflix. Of course, that is far from the truth.
Many people already have multiple TV subscriptions. For example, TiVo says the average US home was using 2.8 TV services in 2018, a 26% increase over the previous year. That said, there is a limit to the number of services people will subscribe to (likely in the range 3-6 for most people.) Moreover, more and more people will bump up against their limit soon. Then, a Disney+ gain could really mean a Netflix loss as people swap in and out services to stay within their budget.
The average Netflix user watches 2 hours a day: False
Ms. Holland says that the average Netflix user watches for 2 hours per day. This statement is almost certainly false. Here’s why.
At the beginning of 2018, Netflix said that it was streaming 140 million hours of content on an average day. At that time Netflix had 118 million paid and free subscribers worldwide. So, the average Netflix subscription streamed 1 hour and 11 minutes.
However, family members share the Netflix subscription. The average home in the US has 2.5 residents, and other high-subscriber countries also have two or more people per household. So, the average Netflix user was likely watching 35 to 45 minutes a day on Netflix.
Of course, this is a year later, and Netflix has increased subscribers to 150 million. However, it is unlikely that average usage has tripled in that time. Here’s why. Ms. Holland says there are 300 million Netflix users. If those users are watching, on average, 2 hours a day Netflix is delivering 600 million hours of content a day, or 4-times more than one year ago.
More likely, Ms. Holland simply misspoke. She probably meant Netflix subscribers. That would mean the company was now delivering around 240 million hours per day.
Still plenty of room to grow: True
“We’ve seen in the U.S. and other countries that other countries are growing as quickly as they have before…. We have 139 million paid members, which translates to something like 300 million viewers around the world (and) we believe we can be growing for quite some time.”
For the last three years, Netflix has grown US subscribers about 10% per year. The company has done this despite two price increases. Growth could slow a little in the fourth quarter. The release of Disney+ and WarnerMedia’s services are sure to raise the noise level in the market. However, it will likely still turn in 8% or better subscriber growth on the year. Beyond 2019, growth will slow as Netflix penetration of US homes heads toward 60% from the 50% it is now.
International subscriber growth has also stabilized over the last two years at 40%. With many International markets well behind the US in the penetration of SVOD, Netflix is leading the expansion in many countries. However, there are clouds on the horizon that could restrain growth:
- The EU 30% content quota rule
- Netflix weak performance in poorer markets, especially India
- Growing competition from local broadcasters and operators.
Notwithstanding the potential issues, International subscriber growth should continue at 2018 rates this year. Overall, expect overall subscriber growth to maintain 25% in 2019.
Netflix users take “a couple of seconds” to decide what to watch: Depends, but mostly false
Ms. Holland pointed at the enormous investment in technology Netflix has made in personalizing the experience of the service. She claims the technology allows users to decide in a couple of seconds what to watch. I don’t think I have ever made a viewing decision on Netflix in two seconds.
I just tested this out. After logging in on my Samsung smart TV, I went to continue watching the next episode of a show I had seen last night. It took me 5 seconds from the home screen to pressing play on the show.
The only way two seconds is achievable is if a user selects the first show recommended to them (usually whatever is new on Netflix) when they log in.[ii]
[i] I do not mean to imply Ms. Holland intentionally misled people at the conference. Also, she said many more things than the four statements I quote. However, the ones I used were the most concrete claims I saw in the piece published in the Hollywood Reporter.
[ii] 2 seconds may be more achievable on a touch screen device. However, by Ms. Hollands on words, most Netflix viewing takes place on the connected TV.