If you’ve ever fantasized about potential a Netflix video game service, a Netflix smartphone or a Netflix movie theater pass, don’t hold your breath.
That’s the message from Netflix CEO Reed Hastings who made it clear on Tuesday that the company cares about one thing and one thing only: streaming video.
Yes, the streaming market is getting increasingly crowded with AT&T, Apple, Disney, and Facebook all rushing in. But Netflix isn’t worried about hitting a ceiling in the streaming business and being forced to find growth in other markets anytime soon.
“There is so much growth ahead that’s possible in streaming video entertainment, so we’re just going to focus on that for a very long time,” Hastings said during a webcast for investors and analysts following Netflix’s third-quarter earnings report on Tuesday.
By Hastings’ reckoning, there’s a good five to ten more years of room left for Netflix to grow in the streaming market.
Netflix pretty much invented the subscription streaming video market, and it dominates it. It now has some 138 million paying subscribers around the world, far more than rivals such as Hulu.
That success is attracting lots of other companies. Disney plans to launch a rival streaming service next year. Warner Brothers, now owned by AT&T, just launched the DC Universe streaming service. Facebook has released a collection of short-form and long-form videos. And Apple has released a couple of streaming shows and has several more in the works. So too Facebook.
And that’s not to mention its long-time rivals, which include Amazon and Hulu.
Even Walmart is reportedly planning to jump on the streaming bandwagon.
For the near future, though, there’s more than enough room in the market for both Netflix and its rivals, Hastings said. The market is growing fast enough that it’s not about to turn into a zero-sum game, where to gain a customer, Netflix would need to steal one from one of its streaming rivals, he said
“Someday there will have to be competition for wallet share,” Hastings said. “But,” he continued, “it seems very far off from everything we’ve seen.”
Indeed, things looked very good for Netflix in the third quarter. It added 7 million subscribers — 2 million more than it had forecast — and posted a much better-than-expected profit.
Still, even if the market is growing fast enough that the competition from Disney and the other companies won’t crimp Netflix’s subscriber growth, it could hurt the streaming media giant in other ways. Most notably, it could restrict the amount and types of videos Netflix will be able to license from its rivals or force it to pay more to either license that content or develop new productions.
Already, Netflix will have to contend with the end of its licensing deal with Disney at the end of this year. Meanwhile, in recent years, Netflix has dramatically increased the amount it spends on content.
But on the webcast, Netflix officials downplayed both threats. The ending of such licensing deals has presented the company with new opportunities to develop its own content, particularly unscripted reality shows, said Ted Sarandos, Netflix’s chief content officer. Those shows are attracting similar audiences as the scripted shows they’ve replaced in the company’s lineup, but they cost less to produce, he said.
Meanwhile, despite the growing competition for content, Netflix expects to get a handle in coming years on its investment in shows and movies, said David Wells, Netflix’s chief financial officer.
This year, the company expects its free cash flow — which represent the cash generated or used up in operations less the amount its investing in things like equipment and content — to be in the range of negative $3 billion to $4 billion, thanks largely to the money it’s spending on its Originals. It expects to see a similar outflow of free cash next year. But starting in 2020, it expects that outflow to start to decline, Wells said.
That outflow of cash has been beneficial to the company, he said.
“We’re seeing those investments drive a lot of growth,” Wells said. But, he continued, “Netflix is approaching the point where our growth in operating profit is going grow faster than our content cash spend.”
To be sure, Netflix is not averse to diversifying eventually, Hastings said. It actually did just that when it moved from its original business of mailing out DVDs into streaming, he noted. But for now, Hastings and his colleagues see more than enough opportunity in the streaming business to stick with it.
“Someday, you know, many, many years from now, we may need to diversify, but for now, let’s focus on the core,” he said.
So if you’re waiting for Netflix-branded popcorn and sodas to go along with a binge session of Stranger Things, check back in 5 years.
Updated Oct 16 with benchmark results. We will provide a full rating after we’ve completed battery testing. The Pixel 2 XL was the ultimate big-screen camera phone, and it looks like the Pixel 3 XL is the new king.We’ve been testing the 6.3-inch Pixel 3 XL ($899 from Google, $929 from Verizon), and this flagship...
If you’re interested in technology, then one of the most fascinating longer reads available about Silicon Valley culture is the Twitter serial posted last week by Morgan Knutson, a former Google+ web designer. Morgan wrote more than 200 tweets over a period of five days about his brief tenure at Google+, the long troubled and...