Netflix to pare back US marketing spend to free up budget for international brand push
Netflix is moving marketing spend from the US into international markets in a bid to accelerate growth outside its homeland after membership figures topped 60 million global users in its latest quarter.
The streaming service said it can grow “a little bit faster on international” though the increased spend is not directly tied to the influx of five million subscribers in the period. Rather, it stems from the belief that its more content driven approach to promoting the brand, which leans heavily on digital, will work better currently in international markets.
Netflix will switch up the strategy depending on how well it is known in those places. So in countries where the brand is very popular like the UK, activity will be more targeted and honed around content. Whereas in markets where it is still building the brand, there will be more of a mixture of offline and online spend.
The aggressive charge on international markets builds on its pledge earlier this year to be available in 200 global markets by 2016. It came as the company’s US growth showed signs of slowing last year amid greater competition with it looking abroad to maintain momentum in a service roughly available in around 50 countries today.
David Wells, chief financial officer at Netflix, said the decision to pull budget from the US would be for one quarter but added the company is always looking to experiment to get the right mix for growth. “We are growing revenue faster than we are growing our expenses,” he continued and “will continue to test around the edges of where things are better spent”.
“We have migrated over the last two to three years to be more content forward in our marketing, more digital in our marketing. We are getting smarter and more efficient about how we put those dollars to use. And so right now we think there is a greater opportunity with international and that's what we are doing, we are moving to international spending,” he added.
The investments are to be backed by a new user interface later this year as well as a bigger push for Netflix original content to its members, using its customer data to help identify which members would be most likely to enjoy shows like Daredevil and House of Cards. It aims to turn the company’s original programming into a bigger draw for customers as the streaming service looks to ward off the threat from the likes of Apple and HBO.
The main perk for Netflix behind creating more content is it being cheaper to pay higher production costs upfront as opposed to paying more out over the life of a licensing deal. Its challenge is to ensure its content is just as valuable as the licensed shows in the eyes of customers.
Netflix’s latest results show this may be starting to gain traction with the growing popularity of shows such as House of Cards and Orange is the New Black spurring the biggest quarterly increase in subscription numbers since it launched eight years ago. The subscription rise helped lift revenue by 24 per cent in the three months to March to $1.57bn.