Along with more original Netflix content, we can also expect to see more bundling of its streaming service with pay TV, internet and mobile services, as well as more interactive storytelling like what we recently saw with “Black Mirror: Bandersnatch,” according to company executives.
A major part of the reason for the company’s decision to recently increase U.S. subscription costs is so that it can increase its investments in original content, Greg Peters, chief product officer, said Jan. 17, during Netflix’s quarterly results video interview for the fourth quarter (ended Dec. 31).
“The model we’ve got is a fairly simplistic one, where we think our job is to effectively invest the money that our subscribers give us every month, so that we can give them incredible content and a better and better product experience,” he explained, adding: “If we do that well, we create more value for our subscribers and then occasionally, we’ll come to them and we’ll ask for a little bit more money, so that we can actually start that next cycle of investment.”
Netflix executives then look at “the engagement levels and a bunch of other things to try and understand what our pricing should be and generally we’ve seen that those are pretty accurate and the price changes that we’ve done are rolling out as expected,” he said.
The company recently boosted pricing on its U.S. subscription plans by 13-18% — its basic plan by $1 to $8.99 a month, its standard (and most popular) plan by $2 to $12.99 and its premium plan by $2 to $15.99.
On the bundling front, it’s still “early on in that process, but I would say we’re quite excited by the results that we’re seeing,” Peters said, adding: “I think mostly it’s because we believe it allows us to access a segment of consumers who are big entertainment fans, but maybe they’re not as sort of technology forward or early adopters, and so they haven’t signed up with us directly. And so by putting Netflix on a set-top box, which they’re using to access a bunch of other video content and by including the Netflix subscription in a package of either their mobile subscription or pay-tv subscription, we can make it just super, super simple for those folks to get to know Netflix and to enjoy the kind of big shows” that the company is offering, including the movie “Bird Box,” he said.
Therefore, he said: “I would anticipate we’ll do more of those” bundling deals. The most recent bundling deals included one with Sky in Europe and “we’ve got more to come,” he said. However, he added that, although “we’re going to grow that segment of the business…it’s small relative to total organic subscriber acquisition that we have.”
An added benefit of those bundling deals is that Netflix’s “distribution partners turned out to be great promoters of our content brands as well,” Ted Sarandos, chief content officer, said.
Meanwhile, the interactive elements of “Black Mirror: Bandersnatch,” in which viewers were able to make certain decisions for the show’s main character, received a lot of press in recent weeks. That was a “great example of us trying to take a technical capability and the flexibility of our distribution platform and trying to figure out how do we use those things to innovate on storytelling in a storytelling format – and it’s super exciting to be able to do that in a way [that] drives more engagement,” Peters said.
He added: “You should anticipate we’ll do more of those as we start to explore that format.”
There had been “a few false starts on interactive storytelling in the last couple of decades,” Sarandos noted. But he said: “We’ve got a hunch that it works across all kinds of storytelling and some of the greatest storytellers in the world are excited to dig into it. To give you some sense, that’s over five hours of content that’s produced for that episode for people to choose their own paths, and there’s countless ways that they could go and end up with. And that is an incredible challenge and [an] exciting thing that differentiates Netflix for creators.”
Within the challenge presented by the interactivity is “also an opportunity… to bring technology to bear, to create a toolset for creators to make that process easier and more effective,” Peters said.
Netflix reported subscriber growth for the fourth quarter, saying global paid subscription memberships grew 25.9% to 139.26 million after it added 8.84 million people (1.5 million in the U.S. and the rest in other markets). Revenue grew 27.4% from a year ago, to $4.2 billion, but profit slipped to $134 million (30 cents a share) from $186 million (41 cents a share).
In its first four weeks on Netflix, “Bird Box,” starring Sandra Bullock, was viewed by more than 80 million member households, Netflix said in its quarterly letter to shareholders. It’s also “seeing high repeat viewing” for that movie, it said.