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Netflix Sub Growth Could More Than Double in Second Half as Original Content Slate Expands: Analyst

The Mitchells vs. The Machines
(Image credit: Sony Pictures)

Netflix could more than double its total subscriber additions in the second half of 2021 as its original content slate expands, while Q2 growth, fueled by children’s programming and international series, should be in line with guidance, according to Canaccord Genuity media analysts Maria Ripps and Michael Graham.

In a note to clients issued Wednesday (July 14), the analysts estimated that Netflix would report about 1.1 million customer additions in Q2, slightly above company guidance of about 1 million additions. But Ripps and Graham expect bigger gains in the second half of the year — about 14 million customer additions (more than twice the five million added in the first half of the year) — fueled by the return of several popular series and a slew of new originals.

Netflix is scheduled to report its Q2 results on July 20. 

Ripps and Graham expect Netflix to end 2021 with almost 223 million total paying subscribers, up 19.2 million from the prior year, but still behind the 36 million it added in 2020. In 2022, the analysts predict Netflix will have nearly 250 million global customers, up 26.6 million.

After a sluggish first half in 2021, Canaccord expects Netflix’s second half content lineup to have “significantly more firepower,” with the July return of series Atypical, Virgin River, Never Have I Ever, and one of its most popular shows of 2020, teen drama Outer Banks.    

Reality dating show Sexy Beasts debuts on July 21 and similarly themed reality hit Love Is Blind comes back a week later for a three-episode reunion. On the film side, the third installment of teen drama The Kissing Booth premieres on Aug. 11 followed by He’s All That (featuring the acting debut of Tik Tok star Addison Rae) on Aug. 27, and action comedy Red Notice, starring Dwayne “The Rock” Johnson, Gal Godot and Ryan Reynolds on Nov. 12. Lin-Manuel Miranda musical Tick, Tick … Boom!, season two of The Witcher, and Don’t Look Up are also slated for fourth quarter release.

New episodes of past hits after a COVID-induced hiatus should goose next year’s subscriber rolls even further, according to the analysts. 

“The content pipeline for 1H22 and beyond is also robust as COVID-driven production delays pushed out new seasons of some of the biggest titles like Stranger Things, The Crown and Ozark into next year, and Netflix continues to invest in unique content both in the U.S. and around the world which is helping to strengthen its competitive positioning and differentiate its library from those of rivals,” Ripps and  Graham wrote. 

Netflix has been shaking up its content mix of late, which is reflected in Canaccord’s own top 10 rankings. Animated children’s fare like The Mitchells vs. The Machines, Dog Gone Trouble and Wish Dragon have dominated Canaccord’s TV Power Rankings, while at the same time strengthening Netflix’s position against rival Disney Plus, the analysts wrote.

Original content is still a core growth engine for Netflix, and despite a lighter than usual slate in the past few months, about 64% of the SVOD service’s top ten shows in Canaccord’s power rankings were originals, compared to 63% in Q1 and 59% in Q4. 

As production for its tentpole titles was on hold, Netflix boosted its commitment to children’s content, licensing The Mitchells vs. The Machines from Sony Pictures, which stayed in the top ten rankings for each day of the quarter after rights were purchased. Kids movies also made up six of the top ten films in Canaccord’s power rankings  during the quarter, including Netflix-produced Dog Gone Trouble and Wish Dragon joining licensed fare like Home, Madagascar 3 and The Secret Life of Pets 2. 

Ripps and Graham expect that trend to continue, adding that Netflix already has a handful of kids series in the pipeline — A Tale Dark & Grimm and Dogs in Space slated for fall 2021 and Super Giant Robot Brothers expected in 2022.

Investments in local language content also are showing results across the board, with the popularity of series like Mexican mystery Who Killed Sara? placing second during the quarter in Canaccord Genuity’s TV Power Rankings and French thriller Lupin, Norwegian fantasy drama Ragnarok and Spanish teen drama Elite spending significant time in the top ten.

Netflix began producing local language series back in 2015 with the Colombian Cartel-themed Narcos, and followed that somewhat surprising hit with shows like Money Heist (Spain), Dark (Germany) and others. Now such shows are regular hits with viewers.

“...This segment of Netflix’s library serves not just as a tool to drive subscriber acquisition and engagement in international markets, but also as a key differentiating factor compared to other streaming services,” Ripps and Graham wrote. 

The analysts noted that Netflix plans to step up its already impressive local language output on several fronts.

In South Korea, where it has about 3.5 million subscribers, Netflix has invested about $700 million in two product facilities and local language content, and plans to spend another $500 million on movies and TV series produced in the country. The SVOD pioneer has spent about $420 million in India on content over the past two years and said that it plans to spend more than that on 41 new shows and movies it will release in 2021. 

Other countries will see similar investment. Netflix is opening a new office in Italy in the second half and plans to double the number of Italian original series next year; in the Nordic region, where it has 4.5 million subscribers, Netflix has already produced more than 70 original series and plans to open an office there in the second half of 2021. 

Netflix already has spent about $175 million producing shows in Colombia over seven years and plans 30 new projects before the end of the year. In Spain, where it has produced more than 50 titles and opened its first European production hub in Madrid in 2019, plans are to double the number of sound stages from five to 10 in addition to building new post-production facilities, a film lab and high-tech editing suites. In Russia, Netflix has announced plans to produce its first Russian original series — Anna K — a retelling of Tolstoy’s Anna Karenina, while in Mexico it plans a remake of hit comedy movie Nosotros Los Nobles.

Mike Farrell

Michael Farrell is senior content producer — finance.