Futuresource: Netflix to rack up 80MN subs by end of 2016

DetailsEditor | 01 June 2015

In a far-reaching analysis of Netflix's current and almost certain future success, Futuresource is predicting that the SVOD juggernaut will roll on to a business with 80 million subscribers by the end of 2106.

In its report, The Rise and Rise of Netflix, the analyst tracks the tale of the company's journey from its move to digital streaming entertainment in 2008, after closing a three-year content deal with Starz Entertainment, to its current position as one of the biggest spenders in Hollywood which is re-shaping the competitive landscape in television entertainment.

And this re-shaping is being carried out on a global basis, with Futuresource noting the reasons for the success of the subscription video-on-demand (SVOD) business model which led to a user base of 60 million by June 2015. The analyst predicts that over the course of the next 18 months, Netflix will add at least 20 million to this figure and become twice as big as any other pay-TV provider except Time Warner's HBO. That said, Futuresource does point to slower growth for the service in Germany and France, and potential hard work ahead in Japan where there will likely be hitherto unmet cultural challenges.

The reveals how Netflix's 20%+ growth rates, improving margin and strategic dominance of the burgeoning SVOD market has meant that its stock has more than quintupled in the last three years, allowing it to secure the capital it needs to fund further growth and continuing, high level, content investment. Although original material accounts for less than 1% of the titles offered by Netflix, Futuresource estimates that it now accounts for up to a fifth of viewing and at least 15% of total content expenditure. By comparison, notes the report, HBO spent almost half of its content budget on original content in 2014,

Such a base, Futuresource calculates, will drive the company to reach revenues of around $10 billion by 2020, with a contribution margin of 40% by that time. This is despite a huge commitment to content - $3.2 billion's worth in 2014 (including DVD), which the analyst expects to rise to as much as $5 billion in 2016.