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Can Netflix’s Original Film Concept Make an Impact?

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Original movie guidance

In order to boost its market presence, Netflix (NFLX) continues to expand its original movie portfolio. In 2018, it plans to release 86 original films compared to 61 original films released last year. The video streaming giant, which gained popularity based on its huge collection of original series such as Stranger Things and Narcos, is now experimenting with self-produced movies as well.

After the success of Korean film Okja, the leading Internet TV giant plans to produce 17 non-English movies this year. In India, it has hired top Bollywood directors to launch the popular film Lust Stories.

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Original collections to drive subscribers

At least 33% of Netflix’s members prefer to watch movies. However, popular titles are also available through other online service operators such as DirecTV (T), Amazon (AMZN) Prime Video, and Comcast’s (CMCSA) Xfinity TV, thus giving Netflix no additional benefit. So spending on self-produced titles may give Netflix an edge over other video streaming service providers in terms of attracting more subscribers.

From the graph above, you can see the total subscriber growth for Netflix in the last five quarters. During the period, it increased at a CAGR (compound annual growth rate) of 6.1%. It ended fiscal Q2 2018 with 130.1 million members.

Rising movie budget costs

Gradually, Netflix is increasing its investments in new self-produced movies. In December, it released its biggest $90 million budget film Bright, starring Will Smith. It also launched in a few movie theaters as well. Martin Scorsese has chosen Netflix to release his $125-million-budget film The Irishman starring Al Pacino and Robert De Niro next year.

Netflix is expected to spend $7.5 billion–$8 billion on content, of which 85% will be invested in original content. The streaming giant also plans to exit fiscal 2018 with 1,000 new originals, of which 470 titles will launch by the end of the year.

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