A $7.5 Billion Third Quarter and More About How Netflix Did in 2021

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mphillips007 / iStock.com
mphillips007 / iStock.com

In the world of streaming, 2021 was a seamless continuation of 2020 as consumer demand for services just kept on growing. Conviva, an online video analytics company, found that even after the initial hit of the pandemic in the second quarter or 2020, video streaming spiked an additional 13%. A staple in the mix of streaming subscription services is Netflix — which courts around 222 million subscribers — and though not without challenges in 2021, had a prosperous year, as proven by its third-quarter 2021 earnings which saw revenue hit $7.5 billion, representing a 16% year-over-year growth.

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Arguably the most standout achievement that Netflix had this year was “Squid Game,” its original series that amassed 1.65 billion hours of viewing in 28 days following its premiere in fall, shattering records and becoming the most popular program ever for the streaming giant. The success of the ultra-violent Korean drama, which cost $21 million to make and is reportedly worth at least $891 million, likely drove at least some of Netflix’s subsequent growth; in the third quarter of 2021, Netflix scooped up an additional 4.4 million memberships.

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Good Content Rules

But Netflix was far from the only streamer that flaunted major hits.

“HBO Max, for example, had some major success with the release of Zack Snyder’s Justice League, which was a streaming exclusive that redeemed the so-called Syncderverse DCEU,” said Hrvoje Milakovic, the owner of Fiction Horizon, a site dedicated to movies and TV shows. “Other major hits include The Suicide Squad and, of course, Villeneuve’s Dune, which significantly increased the site’s incomes due to new subscribers who wanted to stream these movies.”

And then we had Disney+ which soared with Marvel’s “WandaVision,” “Loki,” “The Falcon and the Winter Soldier” and the ongoing “Hawkeye” TV show, along with Amazon Prime, which scored a homerun with Robert Jordan’s fantasy saga “The Wheel of Time.”

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Can Netflix Run On the Steam of Subscriptions Forever?

Stellar works and critical hits are important for all streaming platforms, but for Netflix, which derives 99% of its revenue from subscriptions, having shows and movies that perform well and can lure in new customers is crucial. Perhaps too crucial. There’s some debate over how much longer Netflix can run on the steam of memberships alone.

“The biggest financial threats to Netflix are: (1) its content production and licensing costs: its difficult to predict which investments are driving subscriptions, (2) the rise of competitors like Disney+ that are cheaper and differentiated content offerings, and (3) a plateau in market penetration where there might not be the potential for new growth in subscribers,” said Joy Lu, assistant professor of marketing at Carnegie Mellon University’s Tepper School of Business.

As the streaming market becomes more saturated, welcoming new, strident competitors like AppleTV+ and Disney+, Netflix might need to spice it up if they want to stay relevant in an increasingly dense space — especially when considering that its rivals bring more to the earnings table than just subscriptions.

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Netflix Should Broaden Its Offerings To Stay Relevant and Successful

This could be achieved by beefing up the online store it launched last summer.

“Netflix can continue to grow by expanding its brand, particularly through means such as the online store it introduced back in June,” said Adam Garcia, founder of The Stock Dork. “Creating Netflix-exclusive merchandise will help advertise and boost interest in the platform.”

Netflix has shown that it’s ready and willing to invest in building out its merch presence. This fall, it partnered with Walmart to unveil a Walmart hub designed exclusively for selling Netflix merchandise. Additionally, Netflix has relationships with droves of other retailers including Amazon, Target, Nike and Sephora.

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Netflix Says ‘Game On’

Another way that Netflix can continue to stay relevant and profitable in an increasingly crowded space is by leaning into the gaming space, a move the company appears boldly committed to making.

“We view gaming as another new content category for us, similar to our expansion into original films, animation and unscripted TV,” Netflix said in its second-quarter earnings report release. “Games will be included in members’ Netflix subscription at no additional cost similar to films and series. Initially, we’ll be primarily focused on games for mobile devices.”

In November, Netflix launched Netflix games on iOS devices, with the debut library including mobile games based on hit shows including “Stranger Things” — a celebrated original series and, back in 2019, the platform’s most-watched show to date (clearly that title has been long lost).

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2022 Could Be Another Good Year for Netflix

Another growth spurt in 2022 isn’t a sure thing for the streaming industry, with the global consulting firm Deloitte predicting that more than 150 million people will cancel a paid streaming subscription in 2022 as part of a massive churn driven largely by Gen Z consumers. But with a lucrative 2021 under its belt and a hearty push into the mobile gaming space — a place packed with Gen Zers, as it were — Netflix has reason to be optimistic about the year ahead.

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