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Since Netflix handed over a bad earnings report of only 1.54 million new users in Q2, Netflix, which entered Q3, directly gave the market a sharp blow, adding a net increase of 4.38 million new users, exceeding Wall Street's expectations of 3.8 million.
Some time ago, the "Squid Game" that exploded made a head start. The first Netflix series to start airing with more than 100 million views was 111 million views worldwide in less than four weeks, surpassing Bridgeton's record of 82 million in four weeks. These are all achievements laid down by Squid Games.
This once again confirms the core logic of explosive content that determines membership growth.
Looking at Netflix's overall results in the third quarter, revenue was $7.48 billion, up 16% year-on-year, and net profit was $1.45 billion, up 83.4% year-on-year. Without playing any superpoint and member patch ads, Netflix completely relied on members to achieve profitability, which was undoubtedly another punch for Aiyouteng, who was on the cusp of the storm some time ago. However, its high membership unit price is indeed unattainable by domestic video platforms.
In the past two years, the competition between streaming media platforms has been turbulent, Disney, Amazon, Apple, etc. have increased their horsepower to catch up, and they all have the posture of fighting with Netflix, and Netflix is now fighting back with digital domineering with unexpected growth, and the market can't help but sigh that big brother is worthy of being a big brother.
Who is holding up Netflix's high valuation?
Since June, Netflix's stock price has been taking off, and by the second half of this year, Netflix's stock price has risen by nearly 30%, and the Netflix Q3 earnings report that has just appeared has injected a shot in the arm for investors.
Netflix showed good profitability and exceeded expected subscriber growth figures. "Revenue for the third quarter was $7.48 billion, up 16% year-over-year, and net income was $1.45 billion, up 83.4% year-over-year. The total number of paid streaming subscribers worldwide grew to 214 million, with a net increase of 4.38 million. ”
In this regard, Netflix attributed the revenue growth to the simultaneous growth of the number of paid members and the price of members, according to the financial report, compared with Q3 2020, Netflix's revenue in Q3 2021 increased by 16%, the average number of paid members increased by 9%, and the average monthly revenue per paid member increased by 7%.
In terms of further segmentation, this time the Asia-Pacific market mainly supported Netflix's beautiful growth data. It is not difficult to find that although the North American market is the number one source of Netflix's streaming business, its high valuation stories of Q3 and future growth are happening in other regions such as Asia Pacific.
According to the financial report, Q3 North America added 73,000 new users, Europe, the Middle East and Africa added 1.805 million new users, Latin America added 330,000 new users, Asia-Pacific added 2.176 million new users, it is enough to see that the Asia-Pacific region is Netflix harvesting the most new users in Q3.
The reason Netflix disappointed the market in the first half of this year was the ugly number of new subscribers. In Q1 2021, the number of new users of Netflix was only 4 million, far from the 6.2 million expected by the market at the time, and by Q2, the number of new users was further reduced to only 1.54 million. In other words, the growth in the number of Netflix Q3 subscribers in the Asia-Pacific region has exceeded the total growth of its Q2 subscribers in the international market.
This is closely related to the popularity of "Squid Games", according to Bloomberg, the production cost of "Squid Games" is not too high, at $21.4 million, or $2.4 million per episode, but Netflix internally estimates that the benefits it brings are huge, will bring more than 40 times the cost value, about $891 million.
Of course, the strength of Netflix's global strategy is not only in this "Squid Game".
"We didn't think it was going to be the hottest series in Netflix history on a global scale. Our team in Korea and beyond is unparalleled. Even in other countries, the number of viewers of these foreign dramas has reached a level similar to that of local viewers, which is a huge success. In the earnings call, Netflix viewed the excellent results of "Squid Games" in this way.
It can be seen that "Squid Game" is a victorious step in Netflix's globalization strategy, but this is only the beginning, and Netflix currently produces localized TV series and movies in 45 countries.
An industry insider also told Bone Duo that Netflix has been investing in various parts of the world, in addition to English, places have been doing small languages, and are very optimistic about South Korea, India and Thailand in Asia, and South Korea has accounted for nearly half of the total investment in the Asia-Pacific region in the past two years.
In February, Kim Min-young, Netflix's director of Asia, unveiled its production plans for South Korea in 2021 and announced that it would invest $500 million (about 3.2 billion yuan) in the production of Korean content, compared to Netflix's total content budget in Asia Pacific of $1 billion.
From the current input-output ratio, the industry insider also gave a high evaluation, that the effect is very good, Netflix's global membership income growth is about equal to the growth of members, almost equal to the production capacity of explosive content.
This is further evidence that the future of Netflix may lie in the Asia-Pacific region.
Netflix,
And Disney+ must have a battle?
However, the risks are also the same, North America is still the main battlefield of Netflix, and the significant slowdown in the number of North American subscribers is an indisputable fact. At the end of 2020, the penetration rate of Netflix in the United States and Canada reached 60%, coupled with the rapid invasion of Disney+, HBO Max, AppleTv and other rapid invasions in the past two years, so that the originally not rich market, competition has become more and more intense.
One of the fiercest is Disney+.
In November 2019, Disney + was launched, 16 months after going online, the number of global subscribers exceeded 100 million, to know that Netflix earned 100 million paid users spent 6 years, according to the 2021 Q3 financial report, Disney + the total number of users reached 116 million, an increase of 101% year-on-year, and Disney + can quickly gather users to play is good content + low price.
Disney+ costs $6.99 per month, and disney+ is only half the price of Netflix if you rate Netflix's most popular HD version at $12.99 per month. In terms of content reserves, Disney+ has a huge amount of exclusive content, and from time to time there are explosive models, such as "Wanda Vision" at the beginning of the year, which has been watched by more than 1 million families in the first weekend of launch.
Digital TV Research predicts that Disney streaming disney+ subscribers will surpass Netflix in 2025, predicting that Disney+ will have 284.2 million subscribers in 2026, while Netflix will have 270.7 million subscribers.
At the same time, the large-scale originality also made Netflix spend a lot of money. Entering Q4, Netflix will also invest in a large number of blockbuster projects, including "Red Notice", "House of Bills", "The Unforgivable", "Demon Hunter", "Emily in Paris", "Don t Look Up" and "Cobra" will launch the first issue or sequel.
It can be said that in Q4 Netflix will usher in the strongest content season of this year, but for profitability, it did not report much expectations, giving a low expectation of $365 million in net profit in Q4.
The biggest advantage of Disney+ is precisely the disadvantage of Netflix, as Disney's streaming platform, it can easily launch exclusive content without burning money on content. In 2021, Disney+ plans to release 31 plays and 20 in 2022.
However, compared with Netflix's openness and dare to spend a lot of money to attract high-quality content around the world, Disney, which has a rich IP, also has its own limitations, its content is saved, and it does not have to pay a lot of money on content at the same time, but also lacks diversity. Compared with today's Netflix, it has formed three content production methods: purchase + co-production, local original content development, and long-term cooperation with local content companies.
And for many countries, they are also very willing to cooperate with Netflix. An industry insider told Bone Duo that in fact, "Squid Game" was written many years ago, but it was abandoned by South Korean investment and later selected by Netflix. In particular, Netflix's high degree of freedom in content and generous spending of money also make practitioners very moved, "Netflix's producer is a real producer, not a BD, you give the script, people immediately give you the budget of the first episode, and then start shooting immediately." ”
The same destination, the integration of the entertainment field in the future
An obvious phenomenon is that whether it is the big brother Netflix or the domestic Aiyouteng, after the local membership can not grow significantly, an important growth point they are looking for is internationalization.
iQIYI spent 150 million yuan to buy the TV series "Zhiyi Mountain" starring Quan Jixian, which is currently online in the overseas version of iQIYI, in addition to 4 Korean dramas and 2 Self-made Dramas in the Philippines. Tencent Video seems to prefer Thailand, Tencent Video Overseas Edition launched the Thai version of "To Our Warm Little Time" and "Count to 10 to Kiss You", "Genius Gunner", "Is It a Friend or Boyfriend", "Gangster Young Master Loves Me" and many other popular Thai dramas, Youku not to mention, in the first half of 2019 alone, it has gone to sea for more than a dozen episodes.
However, whether it is Aiyouteng driving outward or Netflix's global entry, everyone has not found a better way to enter the market, and the action is relatively slow.
The recent explosion of "Squid Game" and the appearance of the Q3 financial report, it seems to show that Netflix has made small achievements in internationalization and found a certain way.
Even in Latin America, where Q3 membership growth is weak due to price increases, Netflix is also full of confidence, and in the conference call Netflix said that the reason for the small increase in Latin America is that the increase in membership prices is that the membership growth slows down in the short term, but in the long run, it helps the development of Netflix's business, while Latin America and the United Kingdom are regions with high market penetration, and it is more difficult to achieve growth in these regions. Still, Netflix is convinced that it can grow its subscriber base in Latin America by producing their favorite episodes for latin Americans.
In terms of project reserves, Netflix is ready, such as the largest Brazilian local drama "Sintonia Season 2" and mexico's new season of "Luis Miguel: La Series" will help members grow.
In addition, e-commerce and games are also the new growth stories that Netflix wants to tell, which is similar to the one-fish multi-food strategy proposed by iQiyi and Disney's entertainment empire, which are all horizontally and vertically extended with their own content as the center in the fight, and finally create a relatively complete industrial chain.
In June this year, Netflix launched its first self-operated online retail store Netflix.shop, which sold T-shirts after the fire of "Squid Games", and also set up a Netflix zone at Walmart to sell popular episodes such as "Squid Games" and "Stranger Things".
Netflix is also aggressively developing its gaming business. In September, it acquired game developer Night School Studio, a company that specializes in interactive narrative productions. This move is also considered to be a new track that Netflix has found in breaking the boundaries between games and film and television, which can allow many of Netflix's IPs to find a new way to show. Earlier, Netflix experimented with interactive movies, creating "Black Mirror: Pandasnake", which may also mean that the game version of "Black Mirror" will appear in the future. And on the Q2 earnings call, Gregory Peters mentioned that "Netflix will make games based on its original TV shows and movies."
Nowadays, the concept of meta-universe is on fire, and Wang Ran of Yikai Capital believes that Meta-universe will promote the global content industry to move closer to the game industry faster, and future content companies, whether film and television, music or offline entertainment, must be a game company at the same time. It is almost inevitable that Netflix will launch the game of "Squid Game" and related NFT assets after the popularity of "Squid Games" worldwide.
But as Netflix itself puts it, "Everything is in the very early stages." "Whether it can go through, who can stand out on several major platforms, and whether it is a single one in the end or the three kingdoms are still unknown."