Netflix doesn’t appear to be too worried about Amazon.
In the company’s quarterly letter to shareholders posted today, it acknowledged that Amazon is becoming a global force in the streaming market though research data shows that Netflix is still way ahead.
“We presume that Amazon Prime Video will become as global as YouTube and Netflix this fall with the launch of the Jeremy Clarkson show,” Netflix wrote in the letter.
Amazon is definitely making an effort to challenge Netflix. In April, Amazon began offering a monthly $8.99 Prime subscription so members could access its video streaming service without paying for a full Prime membership. Amazon also said it planned to double spending on original content in the second half of 2016 compared to the same period last year.
Netflix CEO Reed Hastings downplayed any one competitor’s impact on the company in a question about Amazon during Netflix’s third quarter earnings call Monday.
“There are so many competitors out there for screen time, and we win today such a small percentage of total screen time, that moves by specific competitors are unlikely to have a material effect,” Hastings said. “What affects us is can we continue to win affection, and that’s through doing all this incredible content, through expanding globally, having all those rights be global eventually, so those are the things we’re focused on.”
And while Netflix is the top dog in its field of streaming shows and movies, it is far from the king of the mountain in online video. Hastings said he reminds his employees that while the company is closing in on 100 million members, Facebook and YouTube boast more than 1 billion active daily active users.
Netflix posted strong quarterly results Monday, outperforming expectations for subscriber and revenue growth. That followed a rough quarter, where Netflix fell short of expectations. Quarterly volatility aside, Hastings said he believes we are in the middle of a new era in terms of how we watch TV, and that is a good thing for Netflix.
“We’re fundamentally in this growth cycle to do with the internet, smart TV, people getting used to on demand, all of those aspects. I wouldn’t hook (Netflix’s strong quarter) to micro-variables … It’s much more of a deep force that’s changing the market as more and more people are getting used to internet television,” Hastings said.
The best way for Netflix to keep growing, company executives said on the earnings call, is to continue to put out hit shows like Stranger Things, which got a shout out in this quarter’s shareholder letter as a force behind strong subscription numbers. Next year, Netflix plans to release 1,000 hours of original content, a big increase over the 600 hours the company put out this year. Netflix has a $6 billion content budget next year, a 20 percent increase over 2016.
Netflix’s original content push comes partly from an internal belief that creating original shows, rather than licensing from other producers, is cheaper over the long term. That’s because it eliminates licensing fees and gives the company more control over how it wants to distribute globally.
One big change for Netflix fans will come in the next quarter when the company rolls out its integration with Comcast’s X1 box. Netflix executives did not offer much in terms of specifics on how it would work, but they did say picking Netflix off the Comcast menu will take users into the Netflix interface and everything it has to offer. Hastings, who has had some harsh words for Comcast in the past, pushed the idea of working with the cable and internet giant to figure out what the customer wants and how they can best deliver it. Hastings doesn’t expect the Comcast integration to be a huge subscription driver, but it should make it easier for users to watch more Netflix.
“The more devices we are in, the easier it is to use, but there is no step function here because most of these homes probably have Netflix already,” Hastings said.