With Netflix, Inc. (NASDAQ:NFLX) now available in more than 130 countries, the company wants to take over the world. And it would seem, according to NFLX Chief Product Officer Neil Hunt, the movie streaming giant is on the cusp of achieving this goal. But with higher spending on content pressuring Netflix stock, investors must embrace the reality that taking over the world is an expensive proposition.
In an interview with the Wall Street Journal Monday, Hunt addressed Netflix’s content algorithm aimed at boosting not only the company’s global audience, but also attracting more eyeballs in developing markets.
Hunt, who manages two-thirds of the company’s employees, is credited for the popularity of NFLX. He’s worked with CEO Reed Hastings since the mid-1980s, the Journal noted.
Once the audience selects, say, an award-winning show like House of Cards or Orange is the New Black, Hunt is the person that ensures the shows run without a glitch. That, however, hasn’t been the case for NFLX stock, which has fallen amid increased competition from the likes of Hulu and Amazon.com, Inc.‘s (NASDAQ:AMZN) Prime video.
U.S. Streaming Is Reaching Full Tilt
Both Amazon and Hulu have become bigger threats, unlike in years past. With U.S. streaming subscribers now approaching a level of saturation, global expansion becomes more critical to Netflix and NFLX stock, especially at a time when over-the-top services from Time Warner Inc‘s (NYSE:TWX) HBO Go and Viacom, Inc.‘s (NYSE:VIA) Showtime Anytime are picking up steam.
To mitigate the threat from cable companies, Hunt struck deals with cable companies like Comcast Corporation (NASDAQ:CMCSA) to bundle its service with cable TV to accelerate growth. Still, global growth, which is still relatively untapped, is where NFLX stock can get the best bang for its buck. To that end, Hunt explained that Netflix’s global success amid challenges such as new cultures and languages and different states of internet infrastructure will depend on the company’s content algorithm.
“When consumers sit down in front of Netflix, we have a few seconds to put in front of them a half-dozen choices, one of which is going to be the thing that is the most perfect tonight,” Hunt told the WSJ. “Historically, that algorithm has run in the context of a particular country: We were using the behavior of British consumers to make predictions for British consumers.”
Netflix has now taken that algorithm and is looking to apply it to subscribers worldwide. The company believes it will have more data upon which to offer recommendations to its subscribers. This is now a critical aspect of the service, especially with the platform now in over 130 countries.
Among the company’s new global initiatives, Hunt said that Netflix has moved toward a more “conventional native app,” which gives the service more flexibility since it doesn’t require a constant internet connectivity.
The prospects of global growth is helping Netflix stock respond in a big way Monday. While NFLX stock appears to be the soup of the day Monday, can the company keep this momentum going?
NFLX, which grew second quarter revenue at 28%, has begun to double down on original programming and tweaking its algorithm. These initiatives will cost money. And Netflix stock may prove to be a worthwhile investment.
As of this writing, Richard Saintvilus did not hold a position in any of the aforementioned securities.
