Netflix's Next Act: Winning Over a Larger Share of TV Time

At the end of September, Netflix had nearly 214 million subscribers around the world—larger than any other streaming video service on the market by nearly 100 million. But as growth in the U.S. and Canada continues to flatline, the streaming video giant—which ramped revenue up 16% year-over-year to a record $7.5 billion—insists it still has plenty of runway left. “We are still quite small, with a lot of opportunity for growth,” the company told investors Tuesday afternoon in its quarterly letter to shareholders detailing the company’s financial results. “In our largest and most penetrated market, according to Nielsen, we are still less than 10% of U.S. television screen time. Our approach as always is to improve our service as quickly as we can so that we can earn a greater share of people’s time." One way to do that: capitalize on its competitors' stumbles. Netflix said it saw a 14% increase in engagement on Oct. 4, during Facebook's hours-long outage. The note to investors comes as Netflix continues to see subscriber growth, but as the rate at which it is growing its subscriber count has slowed down. In the third quarter, Netflix added 4.4 million subscribers overall, bringing its total subscriber count to nearly 214 million subscribers. That’s a subscriber growth rate of 9.4% year-over-year, a far cry from the 23.3% increase it reported one year ago, as Covid-19-related shutdowns fueled record growth. Just How Well Has Squid Game Performed for Netflix? There’s a Dollar Figure for That Half of those subscribers in the quarter came from the Asian-Pacific region, an increasing focus for the company, especially as it saw more tepid results in the U.S., Canada and Latin America. Netflix only added 73,000 U.S. and Canada subscribers in the quarter, a modest improvement from the 433,000 subscribers it lost a quarter ago; in Latin America, the streamer added 330,000 in the quarter. “These regions have higher penetration of broadband homes,” Netflix assured investors, “although we believe we still have ample runway for growth as we continue to improve our service.” Part of that improvement to the service is a continued huge investment in programming, some bets of which have paid off. Squid Game, the bloody South Korean drama in which indebted contestants fight against one another for the chance at a cash prize, was watched by a record 142 million subscribers in four weeks’ time, making it the most-popular show the streamer has ever released. (Netflix counts a view when a user has watched two minutes of a show or movie, but recently leaked internal data gave a clearer picture of just how successful the show has been for the company.) Other breakout TV hits in the quarter include La Casa de Papel, the fifth season of which was viewed by 69 million subscribers in four weeks, and the third season of Sex Education, which was viewed by 55 million subscribers, Netflix said. And other series are on track to perform well for the service in the fourth quarter, including Maid, a limited series loosely based on the 2019 memoir of the same name by Stephanie Land that Netflix expects will be viewed by 67 million households in four weeks. A major metric shift Those metrics, though, will soon change, indicating a slight but substantial shift to Netflix’s renewed focus on growing its share of total TV time. By the end of the year, Netflix will begin reporting hours viewers spend watching their TV series and movies, instead of the number of accounts that watch two minutes of them. (Netflix will also begin offering a slightly larger look at how titles perform on its service with more regular metric releases, it said.) “We think engagement as measured by hours viewed is a slightly better indicator of the overall success of our titles and member satisfaction,” Netflix said in its investors letter. “It also matches how outside services measure TV viewing and gives proper credit to rewatching.” That will slightly affect which shows are considered the most-popular on the service, according to side-by-side comparisons of hours viewed compared. Shows like the second season of You and the first and second seasons of 13 Reasons Why are highlighted in the most-watched series when looking at total hours viewed, while none crack the top 10 series when looking at number of accounts. But some breakout hits are likely to remain no matter the metric. The first season of Bridgerton, the Shondaland romance that was Netflix’s most-watched series before Squid Game came along, was viewed for a total of 625 million hours in four weeks, Netflix reported, while Money Heist: Part 4 was viewed for 619 million hours, making it the second-most-viewed series on Netflix history under the new metric. The renewed focus on capturing more time with consumers comes as Netflix also eyes new products and services to keep customers enticed, including an early push into video games that it detailed last quarter. Netflix chief product officer and chief operating officer Greg Peters said then that company's gaming ambitions are “an extension of the core entertainment offering," not a replacement for it. Netflix has also made inroads in ecommerce, including a recently announced partnership with Walmart to sell merchandise for Netflix franchises like Squid Game and The Witcher on the retail giant’s website in an effort to keep consumers invested in Netflix shows and movies long after they turn off the television. Those efforts are also designed to accompany the core streaming product, not to serve as revenue generators on their own.

Streaming & OTT

Netflix's Next Act: Winning Over a Larger Share of TV Time

With 214 million global subscribers, streamer is looking for ways to keep members engaged for longer

Kelsey Sutton

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Kelsey Sutton