Netflix to increase marketing spend to US$2bn

Netflix has revealed plans to increase marketing spend to US$2 billion for this year, up from around US$1.3 billion before, according to a recent quarterly earnings report. In an earnings call, Netflix founder and CEO Reed Hastings (pictured) revealed that the company is increasing marketing spend faster than it is increasing revenue.

The move also comes on the back of the success from shows such as 13 Reasons Why, Stranger Things and Bright, which the company said had a combination of “great content and great marketing”.

Despite the increase in marketing spend, Hastings admitted in a call to investors that despite the rise in marketing spend, Netflix’s “Holy Grail dream” was to have the service be so good at promoting the new content in relevant ways that it would not have to spend externally.

“And as we are right now, it still is a really good financial investment to increase on the marketing, and that may continue to be so but we're always also trying to improve the product and the organic reach, social and PR of the title marketing, where you end up having to spend less on paid marketing,” Hastings explained. He added:

We want great content, and we want the budget to make the hits we have really big, to drive our membership growth.

Overall, the company saw a growth in streaming revenue by 36% to over US$11 billion, with 24 million new memberships, compared to 19 million in 2016. Internationally, the company also achieved a full-year positive international contribution profit for the first time. The streaming service will also grow its technology and development investment to around US$1.3 billion in 2018.

In the previous quarter of 2017, Netflix unveiled that it would spend approximately US$7 billion and US$8 billion on content in 2018. This followed a revenue growth of US$2,985 million for the third quarter of 2017, a year-on-year (yoy) growth of 30.3% compared to the previous quarter. Before that, Netflix announced in July 2017 that it will spend up to US$750 million on content and global expansion.

The move was a bid to increase its investment in content, especially in its original series, having benefited from its content strategy in the areas of revenue and profit growth.

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