Despite the recent controversy around advertisers unknowingly funding neo-nazis, Netflix CEO Reed Hastings admits to having a case of “YouTube envy.”
It’s not YouTube’s ad dollars Hastings is envious of (the streaming service remains solidly committed to subscription revenue) but the number of eyeballs it attracts.
Netflix expects to pass the 100 million user mark this coming weekend, an important milestone but “nowhere near as big as YouTube,” Hasting said during a post-earnings interview with analysts yesterday.
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“We have definitely got YouTube envy and we’ve got a lot a room to go,” Hastings said.
“We’re super excited expecting to cross 100 million this weekend, that’s a big accomplishment. But it’s really just the beginning.”
YouTube has over a billion users while Netflix added 19 million subscribers in 2016. International subscribers now account for 47 per cent of Netflix’s subscriber base and will likely overtake domestic subscribers this year, as the chart below illustrates.
In a letter to shareholders, Netflix said it will spend over $1 billion in 2017 on marketing its content to drive member acquisition. Hastings said the US market is still growing and he doesn’t expect subscriber numbers to hit a wall anytime soon.
“I don’t see any fixed wall. I mean of course, every incremental 10 million is a little harder than the last 10 million, but our content keeps getting better, so those forces offset each other. When you look at the last five years, everyone is worried every quarter about saturation in the US, and we’ve just continued to grow,” he said.
As well as growing the overall number of subscribers, Netflix is focused on “growing each individual user” ie the number of hours each viewer watches.
Which brings us the big competition Netflix is facing: sleep.
When asked about competition from HBO and Amazon, Hastings asserted that the market was big enough for all of them.
“[Amazon are] doing great programming and they’ll continue to do that. But I’m not sure if it will really affect us very much, because the market is just so vast,” Hastings said.
“Think about it when you watch a show from Netflix and you get addicted to it, you stay up late at night. You’re really – we’re competing with sleep, on the margin. And so it’s a very large pool of time. And a way to see that numerically is that, we’re a competitor to HBOs and yet over 10 years we’ve grown to 50 million, and they’ve continued modestly growing, they haven’t shrunk.”
“And that’s because we’re like two drops of water in the ocean of both time and spending for people. And so Amazon can do great work and it would be very hard for it to directly affect us. It’s just home entertainment is not a zero sum game.”