Netflix is taking Hollywood. In 2017, the once DVD-only rental company started moving 1,800 staff into a towering 14-storey office on Sunset Boulevard, California. The glass-clad building sits on the lot of Sunset Bronson Studios – the site of the original 1919 Warner Brothers studios, where Looney Tunes was produced. Another 500-person Netflix office is due to open on the other side of the lot this Autumn.
Inside the building, meeting rooms are named after Netflix shows and equipped with giant wall-mounted TVs, while kitchens are stocked with free snacks and meals. But despite the Silicon Valley touches, the office is more Hollywood than tech bro. Once past the security barrier, valets scuttle from a Netflix-branded gazebo to take incoming Teslas to an adjacent multi-storey parking lot. A giant poster advertising an upcoming series of horror-comedy Santa Clarita Diet is draped down the side of one building. There are ten different sound stages around the 11-acre site: huge, soundproofed warehouses where elaborate wooden sets are built and shows filmed. Netflix has leased eight of the stages, with local news station KTLA and reality TV show Judge Judy currently occupying the others.
Netflix’s takeover of Sunset Bronson Studios is the cap on a period of massive growth for the streaming website (which still has a profitable DVD business). The company has more than 125 million paying subscribers, with 300 million profiles across 450 million devices. On January 7, 2018, Netflix had its biggest ever day of streaming, with users collectively watching 350 million hours of TV shows and movies. (Netflix puts this down in part to an increase in viewers around holiday periods.) It’s planning on spending $8bn on original content in 2018; by comparison, Fox spent the same amount in 2017 on non-sports content.
Netflix’s initial business approach was heavily focused on the US. “We started as Hollywood to the world, because of where we are,” says Netflix CEO Reed Hastings. Now, 21 years after he founded the company, he’s expanding on that vision: “The company is becoming a way to curate some of the world’s best storytellers and to share their content everywhere.”
In the US, the company’s growth is slowing. It has 56 million users in its home territory, but over the past four years this number has started to stall, as the pool of potential new subscribers diminishes. In order to keep growing, Netflix must reach a larger non-US audience, including in countries that don’t always have easy access to data. In January 2016, it added 130 new countries to the list of 60 it was already streaming in; China, North Korea, Russian-controlled Crimea and Syria are practically the only places you can’t currently use the service.
Chief product officer Greg Peters says that the company aims to be “simultaneously local, personal, and global.” Global subscriber numbers overtook those in the US for the first time in 2017, and Netflix has forecast that its international revenue will surpass US revenue ($1.94bn compared to $1.9bn) for the first time by the end of June 2018.
To attract an international audience, however, Netflix needs content that will appeal to viewers across different territories. Its answer is Netflix Originals. What exactly counts as a Netflix Original can be confusing, as these include productions the company has commissioned but also ones it has purchased, such as the first two seasons of Charlie Brooker’s Black Mirror or the Paramount movie The Cloverfield Paradox. “When we think about Originals, it is a show that we are premiering and have exclusively in a given market,” Peters explains.
The first Netflix Originals series was Norwegian-American TV show Lilyhammer, which started airing in 2012. The company is now producing Originals in more than 20 countries and has committed to spending billions on the project, including signing former president Barack Obama and first lady Michelle Obama to create new shows. By the end of 2018, it is set to have 1,000 Originals titles available to stream, the majority of which will have been released for the first time this year, such as big-budget sci-fi series Altered Carbon and fantasy movie Bright, which starred Will Smith.
Open Netflix and you can’t miss them; Originals shows are marked out by the Netflix logo in the top left-hand corner and often take pride of place on the homepage. What you might miss, however, is that the show you’re watching may not have been filmed with an English audience in mind. More and more of Netflix’s shows are having subtitles or dubbing added in different languages in the push for “local but global” content. “I don’t know that people necessarily know the country of origin,” says Kelly Luegenbiehl, vice president of international Originals. “They’re just watching it in the language that they’re the most comfortable in and enjoying the story for what it is.”
More than 90 per cent of viewers of Dark, a German series where children vanish from a small village, are from outside of Germany. More than half the audience for dystopian thriller 3%, which was produced in Brazil in Portuguese, come from other countries.
Some shows have even been dubbed into English – an uncommon practice in the TV industry. Luegenbiehl says that dubbing English has been a steep learning curve, and that voices must sound realistic for the show to work. “We’re finding that having someone with an accent from Denmark, or India, is adding authenticity,” she says. Where possible, Netflix uses a show’s original actors to record their own dubbing. Gritty Scandinavian title The Rain, in which a virus kill millions of people, had its actors record their own English dubbing as well as the original Danish. “There isn’t a second-class feeling around the dubbing experience,” Luegenbiehl says. Where the original cast can’t (or won’t) do their own dubbing, Netflix casts new actors for the voice-only roles.
Despite the international focus when it comes to commissioning shows, however, Luegenbiehl says the results aren’t concentrated on individual countries. “We don’t even look at it always by country; we look at it by what audiences are excited about in different tastes,” she says. “People who love a political thriller, they’re not just specific to one country.”
Tony Gunnarsson, a senior analyst at Ovum who specialises in streaming video, says that shows produced outside of the US will help appeal to non-English-speaking markets. “Growth rates in the US are going to drop into single digits very soon, probably in the next two years,” he says. “Internationally, that’s quite different.”
Netflix currently dominates the streaming market but is increasingly under threat from traditional content producers and other streaming sites. The UK’s three public service broadcasters – BBC, ITV and Channel 4 – have their own streaming services, but reports have suggested talks are underway to create a British streaming service offering shows from all three. Amazon’s Prime Video streaming service has also been aggressively expanding, including buying the rights to adapt JRR Tolkien’s Lord of the Rings for TV. And in 2017, Disney CEO Bob Iger said it would pull its movies from Netflix as it plans to launch a cheaper rival streaming service at the end of 2019.
“Netflix is part of the generational companies where you basically bank against a future where you’re going to hold on to the largest market share in the world,” says Gunnarsson. “You drive investment into the company – that way, whilst profits maybe aren’t as big yet, the promise is always that this is going to happen in ten years.” Netflix plans to spend $8bn on Originals in 2018, up from $6.3 billion in 2017. (For comparison, NBCUniversal spent $10.2bn on non-sports shows last year. Time Warner, which is owned by HBO, spent around $8bn, and Disney spent $7.8bn.) The company makes a relatively modest profit, reporting a net income of $290 million during the first quarter of 2018.
As well as banking hard on its original shows, Netflix hopes to gain traction in new markets by partnering with established TV brands, such as Tata Sky in India and Sky TV across Europe, and by making it easier and cheaper for people to subscribe. In India, for example, Netflix has around five million subscribers, lagging well behind the country’s own Hotstar streaming service. It is currently producing at least six new shows involving Bollywood stars and has reportedly been in talks with Reliance Jio, a mobile operator that offers low-cost data subscriptions.
Its next challenge is to make sure they keep watching. According to Hastings, Netflix’s main aim is for people to watch to the end of a show. “If someone watches 30 minutes of it and stops, that’s not a success for us, or for the customer,” he says. “It’s really the watching it all the way through that we thrive on.”
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