Netflix may have experienced slower than expected subscriber growth in the second quarter, but that won’t stop it from putting money where its streaming mouth is.
During an appearance at the Television Critics Assn. press tour in Beverly Hills on Wednesday, Netflix Chief Content Officer Ted Sarandos said the global streaming giant would continue to increase spending on original and licensed content beyond the whopping $6 billion it spent this year.
“It’ll go up,” he said, without revealing specifics. “We’re hitting where we said we would last year and we’ll have an update on that in the next few months.”
That Netflix is ponying up so much cash on content is not surprising. The service behind such shows as “Orange Is the New Black” and “Jessica Jones” is now available in 190 countries as part of an aggressive push to expand its global footprint. A steady supply of worthwhile content in each territory is key to keeping subscribers and bringing in new ones.
Sarandos kicked off his 45-minute session by once more addressing Netflix ratings — or rather the lack of Netflix ratings. The company does not disclose ratings for its shows. And Sarandos disputed the notion that some companies, such as Symphony Advanced Media and Nielsen, have figured out how many people watch its original series.
He also reiterated that ratings data is not paramount to Netflix’s business because the service is not reliant on advertisers.
“Subscriber growth, not ratings, drives our revenue,” Sarandos said.
His statements come less than two weeks after Netflix disclosed that it missed its subscriber target for the second quarter. Netflix added 1.7 million subscribers worldwide, well below the 2.5 million subscribers the company predicted that it would add in the three-month period that ended June 30. Sarandos cited various factors that contributed to the lower results.
“There were a lot of different conflicting things in the space we were trying to juggle,” he said. “We grew much faster than anticipated in [the first quarter], and slower than anticipated in [the second quarter.]”
Sarandos also addressed the challenges of Netflix’s large-scale global launch, saying it will take time before the company understands user habits in the international territories it has added.
“We found out that everything we learned about Latin America wasn’t helpful at all in Italy and nothing we learned in Mexico really helped us in Taiwan,” he explained. “But that was part of the impetus for the global launch, so that Netflix can learn from being in each of those countries.”
Sarandos cited the company’s 2011 launch in Latin America as a learning experience.
“Latin America was a really difficult process for us,” he said, acknowledging the challenge of adequate bandwidth in some communities and payments. “Now it’s such an important part of our global business.”