Netflix focuses on selling its shows over its product

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Netflix (NASDAQ:NFLX) warned investors at the beginning of 2018 that it would be experimenting with different marketing techniques this year. 

The company said it planned to increase marketing spend more than 50% year over year from $1.3 billion in 2017 to around $2 billion in 2018. During the third-quarter earnings call, Netflix executives were able to clarify what they’ve learned about marketing this year that they hope to take into 2019. 

Netflix set a $2 billion marketing spend budget for 2018. Image source: Netflix.

Netflix focuses on selling its shows over its product

The No. 1 thing Netflix has learned through its experimental marketing this year is to focus on promoting its shows and films more than the overall Netflix brand, chief content officer Ted Sarandos said on the third-quarter earnings call. In the past, the company focused on selling Netflix as a brand and teaching customers how to use its product. While that may still be useful for less-established markets, people in the U.S. no longer need to be taught what Netflix is or how to use it. 

Instead, Netflix has been showing customers and potential customers the types of high-quality shows and films that can only be found on its platform. And specifically, Netflix has tried to get its viewers to binge shows or films on the night they’re released. In other words, Netflix is learning how to create its own version of the box-office “blockbuster.” 

The company has learned that creating megatitles like Stranger Things automatically promotes the Netflix brand overall. A prime example of this is Netflix’s break into the rom-com category this year with The Kissing Booth and To All The Boys I’ve Loved Before. Both original films became overnight hits that sparked widespread media coverage and comments from various influencers. 

In fact, To All The Boys I’ve Loved Before is one of Netflix’s most-viewed original films of all time, with strong repeat viewing, according to a recent Netflix report. The film became a viral phenomenon of its own that has helped put Netflix’s name on the map for original films, rather than just original series. 

This type of specific content promotion is something Netflix didn’t do before, Sarandos explained on the earnings call. But after 2018, Netflix has realized how valuable it is to be known as the go-to platform for hit shows like Stranger Things and hit movies like To All The Boys I’ve Loved Before. In other words, promoting these titles actually creates more value for Netflix than promoting its brand in general. 

Netflix pours money into awards campaigns

A big chunk of Netflix’s $2 billion marketing budget for 2018 has also gone to award campaigns. This, again, is part of Netflix’s push to market its top films and shows as their own brands. 

The good news is that this spending paid off. Netflix had 40 shows nominated for Emmys this year and ended up tied with HBO for the most Emmy wins in 2018. This is huge, because HBO has been around since 1972, while Netflix didn’t release its first original scripted show, House of Cards, until 2013. 

In 2017, HBO went home with 29 Emmys, versus Netflix’s 20. This year, both took home 23 wins, which ended HBO’s 16-year streak alone at the top. At this rate, 2019 may be the year that Netflix finally tops HBO and puts an end to the latter’s Emmys reign. And it’s all thanks to Netflix’s high-quality content and high-quality award campaigns — both of which cost major bucks. 

Netflix’s 2019 marketing strategy

Based on the lessons Netflix learned in 2018, we can expect to see the company continue to invest heavily in general title marketing. That means Netflix will continue working to get large chunks of its viewers to watch the same thing at about the same time to spark conversation around its titles. 

And with award shows, Netflix clearly believes that the positive press it gets around its wins is worth the marketing spend; it puts the company on the same level as legacy content producers like HBO. With 23 Emmys, Netflix can’t be written off as a wannabe Hollywood production studio. Netflix is playing — and winning — in the big leagues. If anything, Hollywood is becoming a wannabe Netflix.

Natalie Walters has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Netflix. The Motley Fool has a disclosure policy.

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