Netflixs latest results highlight tough task for competitors

Source: Mintel 26-10-2016

Netflixs focus on unique content and personalisation continue
to strengthen its position, mirroring its ability to challenge more
established brands according to Mintels Brand Research. Its
competitors face a tough task to fight back, however the launch
of new content and new products may help their cause.
For more information please see Mintels Music and Video
Streaming UK, April 2016, Loyalty and Brands UK, April
2016 and Customer Satisfaction and Brands UK, May
2016 Reports.
What weve seen
Netflix has increased its global streaming revenue by 36% year-on-year in the last quarter,
reaching $2.2 billion, and has so far added 12 million global subscribers during 2016, prompting a share
price increase of 19%

This follows increased investment in programming, reaching $4.91 billion in 2015, up from $2.38
billion in 2013, with much of the focus on original content such as Narcos and Stranger Things in order to
encourage customers to sign up.

Mintels Loyalty and Brands UK, April 2016 Report found that 28% of those who have heard of
Netflix consider it to be a brand that instils loyalty, putting it ahead of other key players including Sky,
Amazon Prime, O2.

In addition, Mintels Customer Satisfaction and Brands UK, May 2016 report found that Netflix
stands out in the technology service provider sector on satisfaction among users, with 36% of them
describing their experience as excellent.

Challenging the established

The strong numbers from Netflix reflect the positive image that it has, both against its video streaming
competitors and across the wider landscape, despite its relatively recent entry into the market. Mintels
Loyalty and Brands UK, April 2016 Report highlighted how it is just as likely to be seen as a favourite
brand as Sky, which has the pulling power of sports content as well as TV and movies.
The same Report highlighted that consumers are more likely to agree that Netflix is a brand that instils
loyalty than other technology service providers. This is something likely to be influenced by its
personalised approach to content, and its continued investment in original programming. As a result,
Netflix is not only able to entice new customers, but is also well placed to keep hold of the subscribers it
already has.
FIGURE 1: Top ranking of technology service provider brands, by agreement with A brand that instils
loyalty, January 2014-March 2016
Base: internet users aged 16+ who have heard of the brand
Rank
Brand
Base
1
2
3
3
5
6
6

Netflix
Sky
O2
Amazon Prime Instant
Video
Spotify
Apple Music
BT TV

1,856
1,910
1,863
1,816
1,662
1,510
1,817

A brand that instils loyalty

%
28
27
23
23
22
21
21

This report is supplied in accordance with Mintel's terms and conditions. Supplied to University of Sussex Library.
Mintel Group Ltd.

8
9
10

Virgin Media
BT
EE

1,865
1,907
1,804

20
17
16

Lightspeed/Mintel
Similarly Mintels Customer Satisfaction and Brands UK, May 2016 Report shows that Netflix is able to
generate a particularly positive experience for its customers. 36% of Netflix users describe their experience
as excellent, a higher proportion than any other brand within the technology service provider category
manages to generate, and joint 20th overall across all brands analysed since the beginning of 2014 (totalling
more than 850 brands).
Content and personalisation
Content is the most important factor behind usage of video streaming services, in particular the delivery of
original content. Mintels Music and Video Streaming UK, April 2016 Report highlighted that original TV
shows and movies are among the most important types of content to provide in order to encourage usage of
paid-for subscription services. As noted in Mintels Analyst Insight Netflix looks to boost exclusive film
content - May 2016, the investment in programming from Netflix marks the ongoing battle for rights to TV
shows and film.
FIGURE 2: Interest in types of paid-video content streaming content, December 2015
Base: 644 internet users aged 16+ who have used paid-for video streaming services in last 3 months

Lightspeed/Mintel
Mintels Make it Mine Trend shows how consumers are demanding more personalised experiences and
products from brands. Netflix taps into this by using masses of data from across its user-base to recommend
titles to different subscribers which means that everyone sees tailored suggestions. By offering original,
unique content, and by personalising the service, Netflix is able to match the wealth of content of more
expensive TV services like Sky and offer something different simultaneously.
At the same time, a personalised service could lead to viewers struggling to find something they want to
watch that is different from what they have already seen. Therefore there could also be value in creating
more random suggestions too, offering an opt-in service for viewers to see trailers of TV shows and films
that would not normally be a part of their regular tastes in order to encourage broader viewing habits.
Competitors fight back
Netflixs advantage on usage, brand preference, satisfaction and loyalty among consumers (as noted in
Mintels Music and Video Streaming UK, April 2016 Report) suggests that competitors have a big
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Mintel Group Ltd.

challenge on their hands to entice people over to their own service, particularly when there is likely to be a
finite amount of disposable income available to spend on streaming services.
FIGURE 3: Key metrics for selected video-streaming brands, January 2016

Base:
*Base: 2,000 internet users aged 16+
**Base: internet users aged 16+ who have heard of a brand and expressed an opinion
***Base: internet users aged 16+ who have used a brand and expressed an opinion
Lightspeed/Mintel
However there is potential for competitor streaming brands to challenge through content, with Amazons
high-profile capture of Jeremy Clarksons post-Top Gear show, The Grand Tour, which launches in
November 2016, likely to encourage subscribers to its Prime service. Indeed, Amazon has also doubled its
own spend on programming, from $1.22 billion in 2013 to $2.67 billion in 2015, with a strong focus on
original content to draw customers in.
NOW TVs link with Sky means that it has an advantage when securing latest releases, which should
appeal to the 73% of video streaming users that state they would be interested in recently released films. In
June 2016, NOW TV launched a new set-top box which enables access to Freeview channels, while a new
NOW TV combo deal offers the option of adding broadband and landline to the set-top box without a
contract, offering consumers more flexibility of service and putting streaming services at the heart of
communications services.
What it means

Streaming services are continuing to challenge more established service providers, with consumers
able to receive unique content with a more personalised experience than traditional TV.

The performance of Netflix has the scope to become a cycle, whereby more revenue means more
investment in programming, leading to even more subscribers. The decision by Netflix to expand
internationally is likely to mean that global revenues continue to increase even when its traditional markets
become somewhat saturated.

There is the opportunity for streaming services to increase personalisation further by offering
tailored payment deals based on the number of TV shows or movies watched.

This report is supplied in accordance with Mintel's terms and conditions. Supplied to University of Sussex Library.
Mintel Group Ltd.