Netflix: International Media Strategy (in a nutshell)

Initially, Netflix’s international expansion relied on a strategy of slow but steady development; expanding services to only a couple of countries each year. However, in response to an oversaturated U.S. domestic market, which has since attracted well-funded competitors such as Amazon and HBO; Netflix has decided to accelerate its global expansion strategy. During a speech at the 2016 Consumer Electronics Show on January 6th, Netflix CEO, Reed Hastings, announced that Netflix had expanded its internet streaming services to 130 new countries. This significant development has now made Netflix available nearly worldwide; opening up, for the first time, substantial new markets such as India, Russia, and Turkey. Almost instantly after this announcement, Netflix shares rocketed more than 6%.

(Red denotes areas served while black denotes areas not served)
Graphic provided by Netflix Inc.

Most noticeable from this global expansion is mainland China, which requires explicit government permission for distribution rights. However, Reed Hastings is optimistic that Netflix will be able to crack the Chinese market; stating that although it may take “many years”, Netflix has already begun building relationships with Chinese partners, possibly forming a future joint venture. Nonetheless, this crucial global expansion has since jumped Netflix’s base subscribers to 74.8 million; with 6.1 million more added only in the month March of 2016. Impressive new markets such as Russia and India will continue boost Netflix’s over all bottom line; as well as give Netflix the significant financial assets to be able to heavily re-invest in themselves, through original content and programming.

Central to Netflix’s product and marketing strategy is its acquisition and development of original content on an international scale. Netflix’s success is twofold; the first is acquiring new subscribers, through expansion of its global distribution network. The second is maintaining the subscribers they already have through new content. In recent years, Netflix has excelled in both ventures, boosting their overall revenue and then using it to create new original content with a global vision. Culminating with their docudrama “The Square”, which was nominated for an Academy Award, Netflix has since expanded into specials, miniseries, live action and animated films, full length TV series, and documentaries. Netflix has made quantity the key of its creative processes.
By developing their business strategy around an international focus, Netflix has been able to maintain their industry leadership. Through the years Netflix has painstakingly built on its foundations in order to create a market which revolves around them. Their international expansion to almost the entire world is a feat looked upon with envy by many of their competitors. Through its digital infrastructure and worldwide media network they have created, Netflix is poised to grow even more exponential in the next years, with the cracking of the Chinese video streaming market on the horizon.


The Lego Movie 2: The Second Part at the Box Office

Lego Movie 2 opened this past weekend. After the success of the first film ($470 million worldwide). The second was projected to open domestically with, at the low end, $50 million. This did not happen. The foreign markets however, have held. This is what we will be talking about today.

Foreign markets are going to make a big impact left by the defecit of the underwhelming gross on the domestic ticket sales. While the movie's production budget was almost twice as much as the first ($60 million vs $100 million for The Lego Movie and Lego Movie 2, respectively). The opening domestic gross was about half; Lego grossed around $69 million and Lego 2 did just shy of $35. But, on a good note, not only did the foreign market hold grossing $18.5 million for Lego 2, and $18.7 for Lego. If Lego doesn't have significant competition in the foreign market, it can start to make up the difference. But domestically, Lego 2 has an uphill climb, as it had no real competition domestically for its key demographic.

The foreign markets, in the past have been under utilized. From lack of distribution, to certain genres not playing or translating well there. Now that the theaters have been built up more, we are seeing how films like The Lego Movie are benefiting. Foreign markets played a large role in the success of the first, grossing $211 million of its worldwide theatrical take. The second is no less important, in fact it may end up playing a larger role in keeping the movie profitable.

Due to the fact that the foreign market is showing to stay consistant, it may end up pulling in more than it does domestically. This is significant in the move to get producers and executives to not underestimate or dissmiss the foreign market. In fact, if this trend continues, we may see a swing towards films that are made for foreign audiences in mind. Lego movie has not opened in China, and that has become a large powerhouse of income. It pushed movies like Aquaman to be the highest worldwide grossing DC movie (even above The Dark Knight and Dark Knight Rises), but didn't gross what they did domestically.

So, the next couple of weekends will be crucial to see what happens and how the domestic gross affects the rollout of the movie in subsequent foreign markets. I believe the producers should start campaigning more to shore up those international proceeds. Otherwise it may be effected as well, and cause the film as a whole to be almost completely unsuccessful financially.