Netflix Needs More Buzz-Generating Movies to Goose Its Subscriber Base
The Emmy nominations were released last Thursday, and Netflix (NFLX) - Get Report walked away with a solid 54 nominations total nominations. That number more than triples the 16 nominations that competitor Amazon (AMZN) - Get Report garnered and is further indication that Netflix is a prime destination for quality television like "Orange is the New Black" and "Unbreakable Kimmy Schmidt."
However, it's becoming increasingly difficult for Netflix to translate that celebrated premium content into new subscribership -- something top of mind for investors with the company set to report second-quarter earnings after market close today. The streaming service has nearly 47 million subscribers already, and it looks like the Netflix market may be close to saturated. The company expects to add only 500,000 subscribers in the U.S. in its second quarter, down almost 50% from the same quarter in 2015. And the company's international numbers are also weak, with the 2 million expected international subscribers much less than the 3.5 million that analysts expected heading into the quarter.
Netflix has found ways to make sure its revenue isn't hit too badly by the growth slowdown, though. It recently raised its monthly rate $2 to $9.99. While that is an effective strategy for boosting earnings, it has to be used sparingly, otherwise the company will risk seeing its subscriber base move to streaming alternatives.
And there are certainly plenty of those. Amazon Prime is slightly more expensive, at $10.99 a month, but also allows the subscriber to get free shipping on Amazon packages and take advantage of deals on Prime Day. Hulu Plus is only $7.99 a month. HBO Now costs a steep $14.99 a month, but has such in-demand content as "Game of Thrones" and "Last Week Tonight with John Oliver."
In order to stay ahead of the pack, Netflix is going to have to continue producing content that viewers really want to see. And not just in the television arena, either. As Jim Cramer recently pointed out on CNBC's "Squawk on the Street," Netflix needs to make a larger impact on the movie business in order to "go to the next level." The company has started releasing original movies, but the buzz around them is often quiet. How many people, outside of Netflix subscribers, knew that a Paul Rudd film called "The Fundamentals of Caring" was released on the streaming site less than a month ago? How many people have heard about Adam Sandler's last two movies, "The Do-Over and "The Ridiculous Six," where were both released on Netflix?
Indeed, if the company wants to see its subscriber numbers spike again, it's going to have to start releasing high-profile content. Netflix lost out in a big way when it failed to acquire the buzzy historical drama "Birth of a Nation" at Sundance, despite being the highest bidder. The movie would have provided just the kind of awards success that Netflix hoped for with "Beasts of No Nation" last year.
However, one missed opportunity does not mean all is lost. The company has "War Machine" coming out this year, a war comedy starring Brad Pitt and produced by his company Plan B Entertainment. Plan B was also behind such Oscar hits as "The Big Short" and "12 Years a Slave." If Netflix can find awards-season success with that movie, then Hollywood will start taking it seriously.
Sure, Emmy nominations are great. But this time next year, Netflix needs to have some Oscar nominations under its belt as well.