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Netflix (NASDAQ:NFLX) Learns Big Screen Flops Can Become Small Screen Hits

Netflix Inc (NASDAQ:NFLX)

Netflix, Inc. is working hard to increase the volume of feature movies in its lineup in response to the outcries of its users that they want more original movies. Last week, news broke that a result of an analyst survey shows that most of the users were on the streaming platform because of original content. Now, Netflix is making serious inroads into the feature films sector with a deal for worldwide rights to Idris Elba’s “Beast of No Nation” and others.

Netflix Inc (NASDAQ:NFLX)

Wall Street Journal reports that Netflix is making serious investments in a mid-range budget and niche feature films that couldn’t find a home in major media studios. Making feature films is a smart move that should keep the firm’s current subscribers happy and draw in new users. An interesting point to note is that a good volume of feature films will help the firm cater for different niches of viewers.

Analysts think buying features films is smart

Netflix has already recorded decent success with its movie selections and the decision to buy rights to “Beasts of no Nation” is a data-driven move. For instance, “Jack and Jill”, and “Pixels” had a poor showing in the box office but they were instant hits on Netflix. The same is also true for “The Last King of Scotland”, which was a flop on the big screen; yet, turned out to be a darling on the small screen.

“Beast of No Nation” performed poorly in the box office where a mere $50,699 after showing in 31 theaters. However, analysts seem to think that Netflix is smart in catering to niche audiences “paying more for certain movies than studios were willing to pay” in the hopes that its users will be happy and loyal. Jonathan King, VP at Participant Media notes “For Netflix to be a real player and support this kind of very ambitious movie at a time when it’s getting tougher, that’s a big deal,”

Netflix had a poor showing in the third quarter (Q3 2015) when it reported that it added a mere 880,000 subs in the U.S. below its prior forecast of 1.15M subs in the quarter. The firm also said its total number of paid subscribers in the U.S. stood at 40.27M below the expectations of 42.52M users. Its profits were also below the estimates at $29M instead of Wall Street’s estimate of $31M.

Netflix is meeting an unmet need with feature films

The move to support feature films contrasts with its previous move in which it was competing with media networks. Of course, many of the original movies that Netflix buys might fare poorly in cinemas but there’s a huge market of people for who the cinema doesn’t hold much attraction. To start with, older people might find the logistics of going to the cinema daunting.

There’s the need to find a babysitter, ticket prices somewhat pricey, seats not comfy, driving at night is added stress, and time a family night out doesn’t always sync.

Last week, Raymond James in a survey on subs, asked Netflix users the primary reason they use the service. Almost 31% of the US users answered original content, –31% is not sky-high but the number beats the 23% who said they use Netflix as a substitute for TV service.

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Victor Alagbe is a seasoned business and finance writer with a specialty in writing about how to invest for the long-term in healthcare, pharmacology, energy and tech stocks. His long-term focus is on stocks that provide a nice mix of growth and income. For the short term, he passionately writes about trading stock options for the excitement and leverage that stock options offer.