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How Netflix Manages to Create Popular Content

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Apr. 24 2019, Published 3:49 p.m. ET

Instant hits

Netflix (NFLX) this month highlighted how its various new titles have been received by its subscribers, portraying a picture of a company that has become a master at churning out shows, movies, and documentaries that immediately strike the right chord with its customers.

In its latest investor letter, Netflix pointed out that scripted television show Umbrella Academy was streamed in 45 million households in its first four weeks of availability on the service. Triple Frontier was watched in 52 million households in four weeks of its availability on the Netflix platform. Netflix said its documentary feature FYRE: The Greatest Party That Never Happened​ was watched in more than 20 million households in the first month on the service.

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Know your customer

How does Netflix manage to create content that resonates with its audience? The company learns from its customers. At Netflix’s recent first-quarter earnings conference, the company’s chief product officer, Gregory Peters, said that customers show Netflix the content they want to watch and the company provides it. With this strategy, the longer Netflix has been in a market, the better it gets at satisfying customers there. But creating great content isn’t cheap. Netflix’s content costs rose to $12 billion in 2018 from $8.9 billion in 2017 and are expected to increase to $17.8 billion by 2020, Variety reported in January.

Preparing for stiffer competition

Netflix is planning more shows and movie releases this year as it prepares to face more competition for subscription video customers. Apple, Walt Disney (DIS), and AT&T (T) are gearing up to launch new subscription video services in the coming months to challenge Netflix. Although Facebook (FB) and Twitter (TWTR) do not sell video subscriptions like Netflix, they are competing for the attention of video consumers.

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