Though subscriber rates are slowing, Netflix may have another area of growth: Getting people to spend more time watching its content.
“We’re still a small fraction of every society’s overall viewing,” Netflix CEO Reed Hastings said on a call with investors on Monday. “So I think there’s still room to go there.”
Shares of Netflix were down about 10 percent Tuesday morning after the company missed subscriber addition projections during its latest quarterly earnings report. But Hastings pointed out that engagement, which Netflix measures through median view time, was growing, even though the company did not release specific figures.
Netflix said last year average viewing hours per membership rose 9 percent year-over-year. The company also said last year users watched 140 million hours of content per day. Given the company had 117.58 million subscribers by the end of the year, that averages out to little over 50 minutes a day per subscriber.
Using external statistics, Netflix accounts for half of TV streaming time in households with over-the-top services but only 8 percent overall video viewing time including traditional TV, according to Nielsen.
GBH Insights’ internal research found the average Netflix customer spends 10 hours per week on the platform, compared to 5 hours for Amazon and Hulu. The Bureau of Labor Statistics estimated the average American watches about 19.6 hours of traditional TV a week (2.8 hours a day) for comparison.
There could be room to grow. But the bigger question remains: Do people even have enough time to watch more content?
“When i see the figures of how much time people spend with media it actually makes my brain hurt,” said eMarketer video principal analyst Paul Verna. “If we’re not in a content bubble, we will be because the amount of programming that’s been pumped through this system with digital, cable and broadcast is staggering.”
With Netflix spending up to $8 billion this year in content to draw in more customers, the company seems to be willing to pour in the dollars to make acclaimed and popular shows. The problem is their rivals are stepping up to the challenge. According to FX Research, 487 scripted series alone aired on TV last year.
And TV is willing to become more like Netflix and lower the amount of commercials.
“Ad-supported television is fighting back against the premium SVODS (streaming video on demand services) with high quality scripted series with limited commercial interruption — NBCU and Turner — to improve the viewing experience and more innovative digital marketing to drive tune in,” said Jill Rosengard Hill, executive vice president at media and entertainment research firm Magid.
Disney’s upcoming streaming platform is slated to launch in 2019, while AT&T is expected to pour more dollars into HBO now that the Time Warner acquisition has been completed. (The DOJ is appealing the Time Warner acquisition though.) Others services like Sling TV cut into viewing time.
“With massive competition coming from all angles, Netflix and Hastings have a pivotal 12 to 18 months ahead, especially with [Disney CEO Bob] Iger and Disney laser focused on streaming initiatives with its standalone service launch in 2019 and the Fox assets likely under the hood,” GBH Insights chief strategy officer and head of technology research Daniel Ives said. “With no ads, Netflix has bet the farm on content and subscriber growth, which has been a genius strategy to date. Although new competitive challenges are now on the horizon.”
Competition only going to get worse, eMarketer’s Verna added.
“There aren’t enough hours in the day to watch the shows that are getting a lot of buzz,” Verna said. “I’m reading about a lot of shows that even as someone who tracks the media industry I’ve never heard of. These services are bumping up against people’s limits in terms of available time and in terms of wallet.”
Note: CNBC’s parent company is NBCUniversal.
Source: Tech CNBC
Netflix is looking at watch time as a new area of growth, but the competition is stiff