The past year hasn’t been the best for Netflix. After making several strategic blunders, including one of the most painful branding disasters in recent memory, the company lost subscribers and saw and investors dump its shares.
But mistakes behind it, Netflix is pushing forward and in June, the company achieved a significant milestone: its subscribers watched more than 1bn hours of video.
Reed Hastings, Netflix’s CEO, announced the milestone in a Facebook post:
Congrats to Ted Sarandos, and his amazing content licensing team. Netflix monthly viewing exceeded 1 billion hours for the first time ever in June. When House of Cards and Arrested Development debut, we’ll blow these records away. Keep going, Ted, we need even more!
TechCrunch’s Ryan Lawler suggests that, depending on how many subscribers Netflix had last month, each one may have consumed, on average, an hour to an hour and fifteen minutes of Netflix video each day. That’s just a fraction of the five hours a day the average American spends in front of the television each day, but a significant fraction.
Of course, as Hastings post hints at, the availability of desirable content is a key driver in the growth of Netflix’s hours-watched-per-month metric, so it’s no surprise that Netflix is investing heavily in content in the belief that the digital delivery of programming is where its future lies.
It is almost certainly correct in that belief, even if it jumped the gun on trying to marginalize DVDs-by-mail, but despite its impressive growth in hours watched per month, Netflix’s future isn’t certain.
The problem: content costs money, and increasingly, lots of it. Licensing deals are expensive, and Netflix is arguably at the mercy of its licensors, some of which appear to be taking advantage of their leverage. The company is ramping up original content production, but original content is hardly cheap. Case in point: the House of Cards political drama that Hastings referenced in his post reportedly caused tension between Netflix and production company Media Rights Capital over the series’ $100m budget.
With this in mind, it’s clear that the question for Netflix isn’t whether it will be able to drive well beyond the 1bn hour mark, but rather whether it will make or lose money on each of those hours.