Netflix credits ‘well honed’ marketing for revenue growth

Netflix credited “well-honed” marketing messages and increasing marketing effectiveness for helping drive up revenues, net income and subscriber numbers in the fourth quarter as the US streaming service invests in marketing to increase brand awareness.

Breaking Bad
Revenues up 17 per cent at the US streaming site, which showed Breaking Bad, as improved marketing effectiveness helped boost brand awareness.

Revenues at the firm rose by 17 per cent year on year to $1.1bn (£662.9bn), while net income increased fivefold to $32m (£19.2m). In total, subscriber numbers hit 44 million and it expects to add a further 4 million in the current quarter.

“We’ve seen increases in consumer brand awareness and likelihood to recommend across markets as our content offering builds and marketing messages are honed,” says Netflix.

Netflix, which broadcasts Breaking Bad and House of Cards, has upped its marketing spend over the past year, increasing total investment by a fifth year on year to $136.8m (£82.4m) in the fourth quarter. In international markets, which includes the UK, that spend rose by 10 per cent to $59.8m (£36m) as it launched new campaigns in countries including Brazil and Canada aimed at bringing Netflix to new audiences.

Subscriber numbers internationally rose by 1.74 million to end the year at 10.93 million, helped by deals with cable companies such as Virgin Media in the UK that saw it launch its app on the TiVo pay-TV service. The firm says it will look to ink similar deals with other cable operators.

Netflix attributes a 14 per cent increase in subscribers in the US to “marketing effectiveness”, as well as service improvements and sales of internet-connected devices. The US streaming service has added new features recently including simultaneous streaming and user profiles that CEO Reed Hastings said on a conference call yesterday (22 January) were helping to “improve functionality”.

He added that Netflix has previously focused too much on making its service simple rather than adding in features that might make the service better to use but that it was now shifting focus.

“The simplest iPhone would have no apps but it wouldn’t be a better iPhone. A great service is a product of functionality and ease of use. We have shifted away from simplicity as the end goal and are more focused on getting the best functionality,” he said.

Netflix has been trialling a new tiered subscription model in the US, charging from $6.99 (£6) depending on the number of users as it looks to attract more people to the service. However, Hastings ruled out moving to an advertising-based model.

“The brand over the next couple of years really stands for a commercial-free experience. We put our consumers in control of the experience so that can watch when they want, play when they want and pause when they want. We don’t cram ads down people’s throats,” he said.

Netflix is also spending more on content, with its “content obligation” increasing by $700m (£421.8m) last year to $7.3bn (£4.4bn). That is in part down to new deals with Marvel, Universal and Sony, as well as its continued investment in original content, which it plans to up “pretty dramatically”.

“Original content spending is going to continue to grow because it is so important in terms of brand enhancement and marketing,” said Hastings 

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