Netflix bets $2bn on marketing

Pippa Chambers
By Pippa Chambers | 25 January 2018
Image source: Netflix

Part of Netflix's “beautiful Q4” results this week can be attributed to the success it's had with its ramped up marketing activity.

The content giant, which grew streaming revenue 36% to over US$11 billion, added 24 million new memberships and achieved a full-year positive international contribution profit for the first time, and more than doubled global operating income, has admitted that its marketing plan has really paid off.

As such, it's now upping its marketing spend for 2018 globally, from about US $1.3 billion to approximately US $2 billion.

In Australia Netflix has a large ad presence in out of home across street furniture and murals, as well as social media. Netflix also went big on experential matrketing tactics this year by partnering with the Sydney Opera House for the premiere of Stranger Things 2. See: The rise of experiential marketing; why TV fans want more than streaming.

“Big hits like 13 Reasons Why, Stranger Things and Bright result from a combination of great content and great marketing,” Netflix CEO Reed Hastings said in an investor letter.

“We’re taking marketing spend up a little faster than revenue for this year because our testing results indicate this is wise.

“We want great content, and we want the budget to make the hits we have really big, to drive our membership growth. We’ll grow our technology and development investment to roughly $1.3 billion in 2018.”

Netflix competes with SVOD service Stan, which has aggressive marketing across all channels, and just this month announced PR Queen Roxy Jacenko as its new influencer. Other competitors include Foxtel Now, which leans heavily on TV ads, and SVOD service Hayu is also a fan of OOH advertising, particularly on buses, in this market.

Netflix also acknowledged more competitors entering the premium video content market.

On the commercial-free tech side, Hastings says Amazon Studios is likely to bring in a strong new leader given its large content budgets and as Apple is growing its programming, which it presumes will either be bundled with Apple Music or with iOS, it's one to watch.

“Facebook and YouTube are expanding and competing in free ad-supported video content. With their multi-billion global audiences, free ad-supported internet video is a big force in the market for entertainment time, as well as a great advertising vehicle for Netflix,” Hastings says.

He also referenced traditional media companies expanding into streaming, with a nod to Disney acquiring most of 21st Century Fox and plans to launch a direct-to-consumer service in 2019.

“The market for entertainment time is vast and can support many successful services,” Hastings says.

“In addition, entertainment services are often complementary given their unique content offerings. We believe this is largely why both we and Hulu have been able to succeed and grow.” 

On Monday news hit that former CommBank marketer Andy Lark has taken on the top chief marketing officer role at Australian pay television company Foxtel. Lark will no doubt be tasked with pushing the network's new video-on-demand offering throughout 2018, following the marketing push of its major rebrand last year.

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