Dive Brief:
- Netflix announced in its Q4 earnings call that it would increase its marketing spending by 54% from $1.3 billion to $2 billion in order to "amplify the value of the content," according to The Wall Street Journal.
- The streaming service also said it would spend between $7.5 billion and $8 billion on original content this year and continue to invest in programming over the next few years. Netflix has 88 scripted shows, according to the Journal, including several high-profile and award-winning series like "Stranger Things," "The Crown" and "House of Cards."
- Netflix CEO Reed Hastings said in the earnings call that the company sees value in both earned and paid advertising, even though "the Holy Grail dream is that the service was so good at promoting the new content in such relevant ways that we wouldn't have to spend externally." Netflix's recommends content to users based on their previously watched shows, a functionality that it sees as built-in marketing for shows.
Dive Insight:
Netflix's announcement that it will increase marketing spending underscores the need to stand out in an increasingly competitive market for streaming content, a market Netflix had virtually to itself at one point. While some brands have scaled back their marketing budgets, streaming services are likely to be one area contributing to an overall ad spending growth forecast at 3.6% for 2018, according to an analysis by Dentsu Aegis. The media network expects much of that growth to come from high-profile events this year, including the Winter Olympics, FIFA World Cup and U.S. midterm elections.
Video streaming is becoming highly competitive as more services come on board to vie over the growing number of consumers who are cutting the cord from cable for digital alternatives. Though Netflix is the current market leader, the company's increased investment in marketing and original content signals that it's focused on staying on top. The number of TV subscribers continues to fall and is now equal to the number of Netflix subscribers, a PricewaterhouseCoopers survey found. Consumers also reported feeling overwhelmed with the number of streaming services available, with 75% saying they can't handle using more than four. Original programming and exclusive content is one way that Netflix and other video streaming services can lure consumers.
Much of Netflix's marketing budget will likely be earmarked for digital. The Journal references a letter to shareholders where Netflix cited ad-supported online video from Facebook, YouTube and similar companies as being a great fit for the streaming service. Netflix has a wealth of data about its customers and their viewing habits, which will help guide its marketing strategies and increase personalization down the road.
Overall spending on digital media is projected to overtake offline marketing spend in 2018, according to an analysis by the Winterberry Group. Measured media is expected to reach $117.4 billion this year, and offline media and marketing is projected at $97.8 billion and digital media at $100.8 billion.
