Kate Bulkley, Media Analyst.

Netflix chases the grey pound

By Kate Bulkley

Broadcast News

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For Broadcast May 02, 2018

First it came for the 18-24s, now older viewers are in the SVoD giant’s sights, says Kate Bulkley

Netflix will come of age this summer when it turns 21. It didn’t start out being called Netflix (back in 1997, the original test name was Kibble, would you believe?) and its major turning point – the launch of video streaming – wasn’t until 2007, but nowadays it is a big brand. It’s got bigger, too: 125 million subscribers and counting.

It backs a lot of talent, it wins a lot of prizes and it has rocked a lot of boats. Netflix now has another target in its crosshairs: the over 55s. Having gathered in a mass of 18 to 24 year-olds with its SVoD model, the company is now courting their parents, especially in early launch territories such as the US, the UK and Scandinavia.

The commissioning strategy at Netflix attracted young audiences by focusing on comedy, from the likes of Jimmy Carr, Jerry Seinfeld and Chris Rock, and action-adventure shows, such as Marvel’s Daredevil. The younger generation were happy to sign up for an SVoD service that met their needs and lifestyles.

But 55 to 64 year-olds are a different sort. They have a wider and deeper palette – some drama, some sport, a crime thriller, a documentary here and there, which according to research by Ampere Analysis has led to a commissioning shift. Hence The Crown, Team Foxcatcher, Frontier, Mindhunter and Chef ’s Table. No dollar is being left unspent in order to create more compelling offers that will lure the grey(er) generation.

This strategy shift is interesting. The seemingly unstoppable rise of Netflix’s stock price stalled after the company priced a $1.9bn (£1.4bn) debt offer in late April to fund even more spending on original content.

The problem is that the company forecasts its free cash flow to be negative this year – as much as $4bn (£2.9bn) – and it doesn’t expect this to alter any time soon, hence the need to borrow.

With a share price up more than 50% since the beginning of the year, it looks to be a small bump in the road, but it’s significant because it shows some investor concerns over the high cash-burn rate and from where the next wave of subscriber growth will come.

Netflix also wants more international and locally created original content, which is a worry for national broadcasters. During its upfront event in Rome in April, Netflix announced a major increase in its European originals spend.

If its previous strategy was to appeal to younger, English-speaking audiences, it now encompasses an older demographic with a wider range of programming tastes.

“C4 felt the fallout of Netflix’s pursuit of younger viewers in 2016 when Black Mirror left for the world of SVoD. Now ITV appears to be next”

This shift comes with risks. A show that might appeal to a local Spanish audience may not be that attractive across the Netflix global footprint, and that means a lower margin for the company.

Netflix believes it can avoid this issue because it’s “drafting off a world that’s becoming more global and more connected”, according to its chief financial officer David Wells. The company has pointed to recent Spanish hit crime drama La Casa De Papel (Money Heist) as an example.

For local competition, this is fighting talk. Channel 4 felt the fallout of Netflix’s pursuit of younger viewers in 2016 when Black Mirror left for the world of SVoD. Now ITV – with an average viewer age of nearly 60 – appears to be next.

A new Netflix drama – The English Game, which relates the story of modern football and was written by Downton Abbey creator Julian Fellowes – feels very like an ITV show.

The ITVs of this world need to be increasingly nimble, from championing their local programming to working with the FAANGs on co-productions. Producing good content is a big-money game and the new digital platforms have a lot of it.

So there you have it. A maturing Netflix is about to gobble up millions of 55 to 64 year-old subscribers with a range of big-budget shows aimed directly at them.

Every UK broadcaster is now under intense fire – and we haven’t even talked about what Amazon and all the other FAANGs are going to do next. Anybody checked ITV’s stock price recently?

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