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Can Original Programming Help Netflix Edge Out Its Competition?

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Baird sets Netflix to “neutral”

Netflix (NFLX) has long reiterated that its original programming would be the key factor that differentiates it from the competition. However, the popularity of this original programming could be on the wane.

On April 3, R.W. Baird analyst William Power cut the estimate of Netflix’s subscriber additions to 1 million. Baird stated that the survey indicated that Netflix’s fiscal 1Q17 net subscriber additions could be below its internal net additions estimates

Power speculated that Netflix could have lower-than-expected subscriber net additions as the company’s new original programming releases in 1Q17 have been less popular than in 1Q16.

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Netflix’s continued focus on original content

Netflix stated during its fiscal 4Q16 earnings call that compared to newer shows, its top-rated shows with new seasons tend to be more popular among subscribers. Netflix noted that it has to build excitement around newer shows, which is not the case for its more established programs.

The company stated that as the popularity of its original content grows and people become more aware of Internet television, it expects its subscriber base to grow.

According to research from AllFlicks, Netflix’s original content has an average rating of 3.9 out of 5. According to the report, Netflix’s original programs perform 11.5% better than other content.

Netflix (NFLX) intends to spend $6.0 billion on content in 2017 and produce 1,000 hours of original programming. Netflix is also increasingly focusing on producing premium content such as The Crown.

Netflix was asked about this trend at the UBS Global Media and Communications Conference in 2016. The company affirmed that premium content is needed to capture the attention of its audiences with the vast amount of content to choose from.

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