According to a MarketandMarkets report, the global video streaming market is expected to grow from $30.29 billion in 2016 to $70.05 billion by 2021, at a CAGR of 18.3% during the forecast period. The pioneer in video streaming Netflix (Nasdaq: NFLX) is reaping the benefits of this trend with its original content strategy. 

Netflix’s Financials

Netflix’s third quarter revenues grew 30% over the year to $2.98 billion, ahead of the Street’s forecast of $2.97 billion for the quarter. EPS of $0.37 beat market’s projections of $0.32 for the quarter.

During the quarter, it added 5.3 million net subscribers (up 49%), compared with the Street’s estimates of 4.5 million subscriber net adds. US subscriber base grew by 850,000, compared with the Street’s forecast of an addition of 810,000 subscribers. It added 4.45 million international subscribers, compared with analyst estimates of 3.69 million net adds.

For the fourth quarter, Netflix projected revenues of $3.27 billion and EPS of $0.41. It forecasts global net adds of 6.3 million subscribers including 1.25 million US subscribers and 5.05 million international subscribers. Analysts have forecast revenues of $3.15 billion and an EPS of $0.33. The market expects net adds of 6.25 million subscribers.

Increasing Competition

Competition for Netflix is increasing from all quarters. Disney recently announced plans to launch its own streaming platform and will be pulling out its movies from Netflix by the end of 2019. This adds to the competition from Apple and Amazon. Apple is reportedly planning to spend $1 billion on original content while Amazon’ Prime Video service presents a global threat. Even Facebook has joined the fray with its Watch tab for original video content.

This is when Netflix’s original content strategy will help it face this competition onslaught. It has several must-see new releases, like Stranger Things, Orange is the New Black, House of Cards, Fuller House, Making a Murderer, Narcos, The Crown, and 13 Reasons Why, among many others.

Netflix continues to ramp up its original content. During the quarter, it launched several new series such as Ozark, Friends from College, Marvel’s The Defenders, and returning seasons of Narcos and Fuller House. It is also making progress in adding original films with the debut of Death Note, Naked, and To the Bone.

In the fourth quarter, Netflix plans to release its first original Italian and German shows, new seasons of Stranger Things and The Crown, and Mindhunter, its second series with David Fincher who is an executive producer on House of Cards. It will also release a David Ayer film Bright starring Will Smith, for which it reportedly paid $90 million.

The company has $17 billion in content commitments over the next several years and a growing library of original content that had a $2.5 billion net book value at the end of the quarter. It plans to spend $7-$8 billion on content in 2018. It also plans to produce 80 original films in 2018. 

Netflix is now focusing on working with talented content creators. In August, it announced an overall deal with Shonda Rhimes, the creator of hits like Grey’s Anatomy, How to Get Away with Murder, and Scandal.

During the quarter, it also acquired comic book company Millarworld, the comic book publishing powerhouse founded by Mark Millar who created iconic characters and stories like Kick-Ass, Kingsman, and Old Man Logan. The acquisition will help Netflix make films, series, and kids’ shows based on Millarworld’s portfolio of critically and fan-acclaimed character franchises. Millarworld will also continue to create and publish new stories and character franchises under the Netflix label. This acquisition is seen as vital to keep young audiences happy, especially in light of the souring Disney deal.

Netflix’s stock is trading at $202.68 with a market capitalization of $87.5 billion. It hit a record high of $202.83 following the results. It has recovered from its 52-week low of $110.68 last year.