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How Netflix Will Power Global Growth

By Brian Withers and Brian Stoffel - Apr 16, 2021 at 7:41AM

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And continue to win customers despite growing competition.

It's been almost five years since Netflix (NFLX 2.90%) announced it had the capability to stream movies to 190 countries around the world. It's been on a tear since then with revenue more than tripling and shareholders getting in on five-bagger returns. On a Fool Live episode recorded on March 17, contributors Brian Stoffel and Brian Withers discuss how this movie distribution and original content creator will continue to drive growth in every country where it has customers.

Brian Withers: On to Netflix. I have been super impressed with the quality of Netflix original content. My wife and I are movie buffs and watch a lot of their series and original movies. But we're not the only one to think so. On Monday, it was announced that it received 35 academy award [nominations], more than any other movie studios, even Disney. Disney came in second place at less than half. Disney had 15. The biggest film they got the most nominations was Mank. It received 10. It's actually a film that's in black and white. It's a drama about the writing of the classic movie, Citizen Kane. I haven't seen it, but another big winner, The Trial of the Chicago 7, which was a historical drama about those involved with the 1968 uprising during the democratic conventions, is up for best actor in a supporting role and best picture and others. It's a fantastic film. Just loved it.

The next earnings come out April 20.

What to watch for Netflix going forward is they're in 190 countries today. In order for them to continue to grow, they need to specialize on localization efforts. COO and Chief Product Officer Greg Peters talked about that in a recent analyst conference. The transcript is on the investor relations page. He talked about local movies produced in-country with local actors, different interfaces for the software, different payment methods, local go-to-market partners that present the brand in a way that will resonate with the local markets. So they're being really smart about how they are growing globally. Brian, what do you think?

Brian Stoffel: I have a question about, one of the things that I think is really interesting is we're seeing Disney pivot all Disney+ focused. It's obviously not all, but that's going to be their primary growth driver. I think it's become very clear over the last 12 months. I've heard a couple of people say that the whole idea behind investing in Netflix is that eventually, they'll pull back on the amount that they have to spend on original content. But you just talked about their localization efforts, which I think are great and that it's going to produce some really great content. But it's, I think, also going to be hard to pull back on that spending in content if they're doing all of this for the almost 200 countries that they work in.

Do you see that plus Disney being someone that's going to invest a ton of money into content as well? Do you think that will force Netflix to keep spending above what they thought that they would a couple of years ago for the foreseeable future, and what effect do you think that might have on the company's profitability and the stock itself?

Withers: Yeah. I think that's a great question, Brian. Comparing Disney and Netflix, Netflix has been at this streaming video thing for longer than Disney. But Disney has been in the movie business longer than Netflix. It's an interesting play. Netflix came out last quarter and said that their cash flow in the coming year we will be able to handle all of their investments for their content and the movies that they're making. It will be interesting to see, they said, we can self-fund now going into the future, which is tremendously exciting. Who doesn't love a cash flow business like Netflix. It gets 10 bucks a month from people from a 190 countries around the world. It's just tremendous.

The other piece, I think Netflix has a broader audience. For our family anyway, we tune into Disney+ when The Mandalorian comes out and then I cancel it. Netflix, I've never even thought about canceling ever. That wraps it up for Netflix.

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